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THE  LIFE  STORY 

OF 

J.   PIERPONT  MORGAN 


A   BIOGRAPHY 


BY 

CARL   HOVEY 


ILLUSTRATED 


Hew 

STURGIS   &  WALTON 

COMPANY 

1911 


Copyright  1911 
By  STURGIS  &  WALTON  COMPANY 

Set  up  and  electrotyped.     Published  October,  1911 


PREFACE 

The  biography  of  a  living  man  is  a  special 
sort  of  thing  to  write  or  to  read,  and  requires 
a  little  explanation  from  the  author.  Un 
doubtedly  the  reader  needs  to  know  whether 
the  thread  of  argument,  which  forms  the 
more  or  less  unconscious  basis  of  every  work 
of  biographical  writing,  came,  in  this  in 
stance,  from  the  subject  himself  duly  posing 
for  the  public  and  expounding  his  character 
according  to  his  own  notions,  or  whether  it 
proceeded  independently  from  the  writer's 
mind. 

The  fact  that  this  life  takes  Mr.  Morgan 
neither  angrily  nor  bitterly,  nor  extrav 
agantly  nor  pathetically,  nor  according  to 
any  of  the  obvious  methods  of  the  Sunday 
special  articles  (in  which,  up  to  now,  his  life 
has  been  exclusively  set  forth)  but  under 
takes  to  describe  him  seriously  and  intelli 
gently,  will  undoubtedly  convince  some  sim 
ple  souls  that  this  tone  was  in  some  sense 
inspired.  It  is  the  natural  inference,  be- 

331-183 


PREFACE 

cause  to  speak  or  write  sensibly  of  the 
actions  of  any  one  of  our  magnified  Captains 
of  Industry  (such  in  their  power  as  the  in 
ventor  of  the  phrase  never  dreamed  of)  is 
distinctly  contrary  to  usage  and  custom. 
You  must  attack  them  or  toady — there  is 
supposed  to  be  no  middle  ground.  The  rea 
son  for  this  state  of  things  may  be  stated  in 
five  words: — these  men  personify  political 
issues ;  and  having  stated  it,  let  us  leave  it, 
and  proceed  to  contemplate  a  fact  much  more 
important  to  writers  and  readers  of  biog 
raphies.  The  fact,  or  rather,  the  proposi 
tion,  is  this, — in  order  to  depict  a  man  as  he 
really  is  one  must  set  forth  his  own  aims  and 
objects,  and  show  how  he  attains  them,  or 
how  near  he  comes  to  attaining  them,  how  he 
goes  to  work,  and  how  he  feels  about  his 
work.  The  opinions  of  others  matter  little, 
their  theories  little.  It  is  idle  to  measure 
him  with  the  ideal  of  some  other  world,  or 
time.  Suppose  a  Quaker  to  write  the  life  of 
Napoleon, — as  a  Quaker,  of  course;  seen 
through  the  peculiar  green  glass  ideal  of  the 
Hater  of  war,  the  man  of  war  would  come  out 
sickly  and  unhuman.  Almost  anyone  will 
admit  that.  But  not  everyone  will  admit 


PREFACE 

that  it  is  possible  to  describe  a  Morgan  with 
out  looking  at  him  through  the  orange  glass 
of  the  Socialist,  or  the  glasses  of  whatever 
color  of  the  dirty  democrat,  or  the  silken 
toady,  the  hater  of  the  money  power,  the 
adorer  of  the  rich  and  successful,  and  so  on. 

The  author  faced  these  difficulties,  and 
found  them  difficulties.  As  for  the  book,  let 
it  be  said  at  once  that  it  was  conceived  and 
written  independently  by  the  author;  there 
was  never  the  least  influence  or  dictation 
from  without.  The  material  was  gathered 
because  the  subject  was  interesting  and  the 
opportunities  lay  close  at  hand.  And  the 
argument,  above  referred  to,  grew  of  itself 
out  of  a  close  study  of  this  material,  and 
much  questioning.  It  seems  to  be  pointing 
to  the  conclusion  that  Mr.  Morgan's  life  has 
been  one  of  usefulness  and  benefit  to  in 
dustry  and  to  the  country.  This  effect  was 
unintentional,  was  not  preconceived.  But 
it  was  the  perfectly  inevitable  result  of  aim 
ing  at  truth  and  avoiding  caricature. 

NEW  YORK,  1911. 


CONTENTS 

CHAPTER  PAGE 

I     CHILDHOOD  AND  YOUTH 3 

II  BANKING  DURING  THE  CIVIL  WAR  ...     34 

III  THE  RAILROAD  WRECKERS 52 

IV  THE  FIRST  MORGAN  SYNDICATE      ...     67 
V  THE  RESCUE  OF  VANDERBILT    ....     83 

VI  RAILROAD  CHAOS  AND  RUIN      .     .      .      .96 

VII  THE  BEGINNING  OF  FEUDAL  FINANCE  .      .  121 

VIII  THE  TREASURY  CRISIS  OF  1895  ....  146 

IX  THE  RELIEF  OF  THE  GOVERNMENT  .      .      .  172 

X    UNITED  STATES  STEEL 194 

XI  THE  SPIRIT  OF  COMBINATION     ....  224 

XII     A  PERIOD  OF  REACTION 252 

XIII  WORLD  BANKING 278 

XIV  THE  PANIC  OF  1907 293 

XV  THE  MAN  HIMSELF   ,                                .  311 


J.  PIERPONT  MORGAN 


ILLUSTRATIONS 

J.  Pierpont  Morgan Frontispiece 

FACING    PAGE 

Junius  Spencer  Morgan 14 

The  Morgan  Homestead  in  Hartford  .     ...     22 
J.  Pierpont  Morgan  at  the  age  of  Forty   ...     88 

Charles  M.  Schwab,  Henry  C.  Frick, 

Elbert  H.  Gary  and  J.  A.  Farrell 210 

Wall  Street  in  the  Panic  of  1907 296 

Mr.  Morgan's  Yacht  the  Corsair 318 

Mr.  Morgan's  House  on  Madison  Avenue,  New 
York  City 340 

The  Library  in  Thirty-sixth  Street,  adjoining  the 
residence  at  the  corner  of  Madison  Avenue  .  340 


THE  LIFE  STORY  OF 
J.  PIERPONT  MORGAN 


THE  LIFE  STORY  OF 
J.  PIERPONT  MORGAN 

CHAPTEE  I 

CHILDHOOD   AND   YOUTH 

SINCE  the  year  1865,  the  American  Re- ; 
public  has  been  a  business  nation,  andJ 
its  strongest  individuals  have  been  business  i 
men,  and  the  strongest  of  them  all  is  the  sub 
ject  of  this  biography.     What  is  a  business  • 
man?    According    to    a    recent    and    very 
straightforward    definition    "the    business 
man  is  not  a  monster ;  but  he  is  a  person  who 
desires  to  advance  his  own  interests.     That5 
is  his  occupation  and,  as  it  were,  his  reli 
gion."    If  we  may  accept  this  definition  as 
accurate  and  generally  true,  then  it  clears 
the  ground  of  certain  sentimentalisms.     The 
business  man  is  not  a  statesman,  or  an  altru 
ist,  or  a  philanthropist,  at  bottom;  we  only 
bungle  our  conclusions  when  we  apply  to  him 
the  measure  of  their  ideals  and  objects  in- 


4  J.  PIERPONT  MORGAN 

:  stead  of  using  the  measure  of  his  own.  It 
:  is  often  possible  for  a  business  man  to  help 
;  the  public  gratis,  and  come  forward  at  the 
dramatic  moment,  as  a  noble  and  patriotic 
and  disinterested  citizen.  The  thing  has 
been  done  by  Mr.  Morgan,  as  everyone 
knows,  and  followed  by  ink-spilling  praises, 
and  closely  afterward  by  sardonic  comment 
and  reviling.  They  paiijt  him  too  bright  or 
too  black,  as  demi-god  in  one  breath  and  a 
monster  in  the  next,  and  the  wholesome 
truth,  which  is  something  less  fantastic,  re 
mains  untold. 

It  is  reasonable  to  remember  that  the 
great  business  man  is  neither  saint  nor  devil, 
and  that  in  the  long  run  he  is  governed  by 
the  same  practical  motive  of  thrift  as  ninety- 
nine  out  of  a  hundred  busy  American  citi 
zens  of  this  progressive  day.  He  may  ren 
der  an  immense  service  for  nothing,  and  get 
his  name  written  across  the  sky — which  is 
perhaps  the  last  thing  he  thought  of — but 
his  most  telling  and  characteristic  service  to 
1 1  the  public,  if  service  it  is,  comes  from  pur- 
(^  suing  his  own  ends. 

Having   guarded   ourselves   against   the 
usual  foolish  flights  of  fancy,  let  us  admit  at 


CHILDHOOD  AND  YOUTH         5 

once  that  there  are  real  complications  in  the 
case  of  Mr.  Morgan.  He  has  become  the 
dominant  business  force  in  the  country  and 
the  strongest  single  financial  power  in  the 
whole  world,  and,  as  a  matter  of  fact,  he  has 
reached  a  point  where  no  category  will  con 
tain  him.  You  cannot  put  Mr.  Morgan  in 
the  pigeon-hole  of  a  class.  He  is  a  genius,  a 
spirit,  a  very  conspicuous  instrument  of  the 
economic  evolution  of  his  time.  You  cannot 
call  him  a  mere  money-maker,  interested  in 
temporary  gains.  He  instinctively  plans 
for  something  permanent  in  the  structure  of 
money-making  activity;  he  has  furnished 
the  grooves  in  which  all  our  industries  shall 
be  run  for  a  very  long  time  to  come. 

There  are  not  two  opinions  on  this  point. 
"Organiser"  and  "constructive  force"  are 
almost  hackneyed  epithets  as  applied  to 
him.  The  accepted  description  of  his  work 
runs  as  follows:  "He  was  never  a  stock 
gambler;  never  a  bear.  He  never  wrecked 
a  property  nor  depressed  values  that  gain 
might  follow.  His  work  was  always  to  re 
construct,  to  repair,  to  build  up.  Instances 
of  his  force  and  ability  in  this  direction  are 
the  Philadelphia  and  Beading,  the  West 


6  J.  PIERPONT  MORGAN 

Shore,  the  Erie,  and  the  Northern  Pacific 
railways.  In  these  instances  and  in  others 
he  saved  and  rehabilitated  property  that 
otherwise  would  have  been  ruined  and  ren 
dered  useless.  His  enemies  may  charge  him 
with  many  faults — and  he  undoubtedly  has 
many — but  they  can  never  say  that  he  de 
stroyed  a  property.  Nor  has  any  property 
which  he  has  saved  been  exploited  for  gain 
on  the  stock  market  with  his  consent.  His 
work  has  been  in  actual  construction,  in  the 
actual  creation  of  properties.  His  railroads 
have  been  working  railroads,  with  rails  and 
steam  and  rolling  stock;  his  factories  have 
been  smoking  factories,  aglow  with  life  and 
workers — not  paper  railroads  and  paper 
factories  that  exist  only  in  the  imagination 
of  the  stock  jobbers." 

There  is  nothing  of  the  charlatan  sug 
gested  here;  J.  P.  Morgan  is  solid.  Fur 
thermore,  his  rehabilitation  of  a  vast  amount 
of  doomed  property  is  mightily  suggestive 
of  broad  public  service.  Other  men  have 
built  up  industries  from  the  beginning, 
I  chiefly  for  themselves,  as  Rockefeller  con 
structed  the  Standard  Oil  Trust.  But 
Rockefeller  soaked  up  his  competitors  like 


CHILDHOOD  AND  YOUTH 

a  sponge,  while  Morgan  puts  them  on  their 
feet  and  teaches  and  enforces  cooperation/ 
among  them  all. 

A  period  of  the  fiercest  industrial  strife 
seems  coming  to  an  end.  The  head  is  now 
a  long  way  from  the  foot  of  the  financial 
body,  which  is  so  firm  and  gigantic  that  only 
the  strongest  forces  can  cause  it  to  quiver. 
Out  of  a  generation  in  which  lived  Gould, 
Fisk,  the  Vanderbilts,  Rockefeller,  Frick, 
Carnegie,  Yerkes,  Harriman,  Gates,  Heinze, 
Morse,  one  has  emerged  to  rule.  Perhaps 
it  is  not  for  nothing  that  Mr.  Morgan  has 
survived. 

The  concentration  of  wealth  and  financial 
power  that  has  taken  place  in  Mr.  Morgan's 
life-time  is  thus  described  by  the  informing 
writer  already  quoted: 

"In  the  old  days  of  financiering,  all  men 
controlled  their  own  money  and  invested  it 
in  a  business  which  they  managed  them 
selves.  With  very  few  exceptions  (let  us 
put  in  that  farming  is  the  chief  exception) 
all  this  has  changed,  the  great  bulk  of  the 
money  of  the  country  now  being  invested 
in  stocks  and  bonds,  exchanged  for  insur 
ance  policies,  or  deposited  in  banks — its 


8  J.  PIERPONT  MORGAN 

control,  as  far  as  its  profits  are  concerned, 
passing  entirely  out  of  the  hands  of  its 
owners.  Ownership  in  the  numerous  stock 
companies  which  have  been  organised  in  a 
comparatively  few  years  is  distributed 
among  hundreds  of  thousands  of  persons, 
and  thus  the  millions  of  the  many  have 
passed  into  the  control  of  the  few. 

"So  the  trite  question:  Who  own  the 
United  States?  may  not  appear  so  impor 
tant  as  the  query :  Who  control  the  United 
States  ?  One  hundred  and  ten  of  the  coun 
try  's  largest  corporations,  with  a  capitalisa 
tion  of  $7,300,000,000,  are  owned  by  626,934 
stockholders.  The  average  stockholdings 
are  116  shares.  The  manufactories  of  the 
United  States  are  owned  by  many  individu 
als,  showing  a  fair  diffusion  of  wealth,  but 
their  actual  control  is  in  the  hands  of  a  few 
^nen.  In  no  other  line  has  the  control  of  the 
!few  been  so  apparent  as  in  the  conduct  of  the 
railroads,  for  the  very  laws  which  were  cre 
ated  to  prohibit  railroad  combination  have 
fostered  it.  Less  than  a  dozen  men  abso 
lutely  control  fifty-four  companies,  with  a 
capital  of  $4,157,000,000  and  a  total  number 
of  stockholders  of  288,160.  Of  the  fifty-six 


CHILDHOOD  AND  YOUTH         9 

great  industrial  companies,  with  a  capital  of 
$3,143,000,000  and  an  extended  list  of  stock 
holders,  a  few  men  are  in  control. 

"It  will  be  seen,  therefore,  that  the  whole 
tendency  of  the  system  is  concentration. 
The  great  central  power  of  this  concentra 
tion  is  the  bank.  Mr.  Morgan,  ~by  his  re 
cent  merger,  has  accordingly  placed  himself 
at  the  head  of  the  greatest  power  in  control  j 
of  all  the  great  poiuers  of  wealth.  It  was 
said  a  few  years  ago  that  eight  men  virtually 
controlled  the  bulk  of  the  banking  resources 
of  cash  and  credit  in  the  country.  To-day 
one  man  is  fast  getting  that  power  into  his 
hands." 

The  merger  mentioned  in  the  paragraph 
above  is  the  consolidation  by  Mr.  Morgan 
last  January  of  the  rich  Guaranty,  Morton, 
and  Fifth  Avenue  trust  companies  of  New 
York.  The  result  is  a  towering  institution 
possessing  upward  of  $150,000,000  of  re 
sources,  bearing  the  name  of  the  Guaranty 
Trust  Company.  In  addition,  Morgan  con 
trols  and  directs  the  Astor  Trust  Company, 
the  Banker's  Trust  Company,  and  the  Lib 
erty  National  Bank.  His  interests,  direct 
and  indirect,  in  other  banking  institutions 


10          J.  PIEEPONT  MOKGAN 

are  so  far  reaching  that  although  it  would 
scarcely  be  a  work  of  ease  for  the  arch  con- 
solidator  to  create  a  Money  Trust  which 
should  control,  absolutely,  the  cash  and 
credit  of  America,  the  possibility  is  one  that 
;  occurs  to  many  minds,  and  the  Morgan  dic 
tatorship  of  money  is  already  much  more  a 
reality  than  a  conception  of  the  imagination. 

For  it  will  be  seen  that  Mr.  Morgan  is  not 
only  the  financial  ruler  by  virtue  of  what 
lie  already  has — he  is  a  monarch  who  can 
extend  his  kingdom  to  suit  his  ambition  or 
his  need. 

Mr.  Morgan  rules  money  at  the  exact  mo 
ment  of  history  when  money  is  the  thing  to 
rule;  when  it  is  all  important  to  financiers 
to  be  able  to  deny  cash  or  credit  to  a  would- 
be  competitor's  industry,  to  extend  it  to  the 
trusts  and  combinations  that  are  established 
in  the  field. 

It  would  be  pretty  and  neat,  though  not 
truthful,  to  say  that  his  present  position  in 
the  seventy-fourth  year  of  his  life  is  one 
which  he  aimed  at  from  the  first — that  he  is 
realising  his  life's  ambition.  But  the  reader 
will  agree,  I  think,  as  he  reads  this  biogra 
phy,  that  Mr.  Morgan  has  not  been  the  self- 


CHILDHOOD  AND  YOUTH       11 

conscious  force  that  he  seems.  In  fact,  it  is 
obvious  that  in  the  year  1857,  when  the 
young  Morgan  entered  business  in  New 
York,  no  man  could  possibly  have  foreseen 
the  peculiar  opportunities  which  the  twen 
tieth  century  would  offer — the  chance  of  an 
American  kingship  wras  utterly  invisible  to 
the  most  restless  and  conquering  eye. 

His  gigantic  power  is  still  new,  and  as  yet 
little  understood.  He  inspires  his  country 
men  with  awe,  and  with  another  feeling, 
which  is  not  exactly  fear,  but  akin  to  it — a 
feeling  of  uneasiness.  They  see  him  in  the 
terrific  national  changes  of  the  times. 

Let  us  describe  the  beginnings  of  this  ex 
traordinary  man. 

Mr.  Morgan's  earliest  ancestor  in  this 
country  was  Miles  Morgan,  who  settled  in 
Massachusetts  in  1636.  His  paternal  grand 
father  was  Joseph  Morgan,  a  successful 
business  man  of  Hartford,  Connecticut ;  his 
maternal  grandfather  was  John  Pierpont, 
the  Boston  preacher,  poet,  and  reformer. 
Joseph  Morgan  was  altogether  less  distin 
guished  than  Pierpont,  but,  on  the  other 
hand,  he  has  the  credit  of  founding  the 
Morgan  fortune,  while  the  other,  after  a 


12          J.  PIERPONT  MORGAN 

stormy,  brilliant,  but  disappointing  career, 
died  as  the  holder  of  an  obscure  government 
post  at  Washington.  His  story  is  full  of 
interest  and  pathos,  and  some  of  the  traits 
of  his  marked  character  appear  to  be  quite 
as  real,  if  less  definite,  a  bequest  to  his 
grandson  as  the  fortune  which  came  down 
from  Joseph. 

Joseph  Morgan  fought  in  Washington's 
army  until  the  Revolution  was  over,  and 
then  settled  down  to  farming  near  the  vil 
lage  of  Hartford.  He  made  money  enough 
to  invest  it  in  stage  lines  and  eventually  rose 
to  the  control  of  the  chief  roads  of  transpor 
tation  in  the  State.  Hartford,  during  the 
first  quarter  of  the  nineteenth  century,  had 
a  great  prosperity  as  the  centre  of  long 
distance  traffic ;  the  main  line  of  stage  from 
New  York  to  Boston  passed  through  the 
city,  running  from  Boston  to  Worcester, 
Springfield,  Hartford,  Middletown,  New 
Haven,  and  New  York — three  days  each 
way.  Hartford  also  held  the  key  to  the 
trade  of  the  Connecticut  River  valley,  north 
ward  nearly,  or  quite,  to  the  border  of  Can 
ada.  Innumerable  taverns  were  sprinkled 
along  the  countryside,  and  Joseph  Morgan 


CHILDHOOD  AND  YOUTH       13 

also  dipped  into  this  thriving  business.  But 
in  the  fall  of  1839  the  first  locomotive— the 
"Vesuvius"  or  the  "Good  Friend"  or  some 
other  quaintly  named  piece  of  machinery — 
made  its  slow  way  across  the  State,  and 
Hartford's  business  position  was  changed. 
The  old  customers  were  drawn  away  by  the 
merchants  of  rival  towns,  the  stage  lines 
went  to  seed  year  by  year,  and  this  thrifty 
ancestor  quickly  bestirred  himself  in  other 
directions. 

He  opened  a  large  hotel  in  Hartford,  the 
"City  Hotel,"  and  soon  afterward  began  to 
figure  as  a  capitalist  in  connection  with  the 
^Etna  Fire  Insurance  Company  of  that  city. 
At  this  time  these  companies  had  no  cash 
capital,  their  resources  being  represented  by 
the  notes  of  the  principal  "solid  men"  of 
the  town,  notes  ranging  in  sums  from  five 
to  ten  thousand  dollars  each.  The  expecta 
tion  was  that  the  profits  from  the  insurance 
business  would  render  it  unnecessary  to 
call  upon  the  note  makers  for  cash  to  meet 
any  fire  losses,  but  a  great  fire  in  New  York 
suddenly  gave  a  different  aspect  to  things. 
There  was  a  period  of  heavy  losses,  and  the 
prospect  of  calling  upon  the  note  makers 


14          J.  PIERPONT  MORGAN 

became  so  imminent  that  the  notes  were 
offered  at  a  large  discount  to  anyone  who 
was  willing  to  assume  their  liability.  Jo 
seph  Morgan  bought  these  notes  wherever 
he  could,  acquiring  a  large  number  of  them. 
Soon  afterward  the  danger  passed ;  the  pre 
miums  received  for  insurance  proved  ample 
to  pay  the  losses ;  the  company  began  to  ac 
cumulate  a  capital  stock,  whose  cash  value 
was  represented  by  the  increasing  profits  of 
the  business;  and  eventually  the  holders  of 
the  notes  received  stock  in  proportion  to 
the  liability  they  had  assumed.  Joseph 
Morgan  made  a  fortune  from  his  holdings. 
It  was  this  fortune  which  eventually  placed 
J.  P.  Morgan's  father,  Junius  Spencer 
Morgan,  in  the  banking  business. 

Joseph  Morgan  handed  to  his  son,  besides 
fortune  and  the  capacity  for  making  more 
money,  a  genial  disposition ;  he  had  the  qual 
ities  of  the  old-time  host  in  the  hotel  busi 
ness,  and  his  son  Junius  was  a  famous  and 
agreeable  entertainer  on  a  different,  and  of 
course  more  sophisticated  scale. 

Mr.  Morgan's  maternal  grandfather,  Pier- 
pont,  was  a  very  well-known  man  in  his 
time;  the  following  passage  from  an  un- 


JUNIUS  SPENCER  MORGAN 
FATHER  OF  J.  PIERPONT  MORGAN 


CHILDHOOD  AND  YOUTH       15 

known  hand  (it  is  taken  from  an  old  copy 
of  the  Christian  Examiner)  shows  the  im-\ 
pression   he   made.     The    somewhat   high- 
flown  phraseology  cannot  quite  spoil  it  as  a 
real  reflection  of  his  soul : 

"Mr.  Pierpont  united  within  himself  the 
characteristics  of  two  very  distinct  persons. 
One  was  graceful,  cultivated,  delicate,  fas 
tidious  to  the  last  degree,  careful  of  eti 
quette,  studious,  dignified;  with  a  certain 
loftiness  of  dignity,  indeed,  which  strangers 
were  apt  to  find  somewhat  frigid,  but  genial 
and  expansive  with  his  friends,  and  beau 
tifully  tender  and  loving  with  children. 
This  was  the  clergyman  and  the  poet. 

"The  other  was  the  ardent  knight,  armed 
for  battle,  and  seeking  it  far  and  near; 
.  .  .  quick  to  discover  injustice,  he  no 
sooner  unearthed  a  new  wrong  than  he  at 
tacked  it  with  the  fiery  ardour  of  a  nature 
whose  enthusiasm  was  but  the  hotter  for  the 
restraints  which  the  habits  and  tastes  of  the 
scholar  ordinarily  imposed  upon  it.  He 
used  all  his  weapons  at  once :  logic,  sarcasm, 
invective,  poetry — and  sharpened  them  all 
with  a  stern  'Thus  saith  the  Lord!'  This 
was  John  Pierpont,  the  Reformer;  and 


16          J.  PIERPONT  MORGAN 

.     .     .     few  names  rang  wider  throughout 
the  careless,  prosperous  land  than  his." 

Clearly  an  insurgent  of  those  days !  Pier- 
pont  failed  as  a  lawyer,  failed  as  a  merchant ; 
as  a  clergyman  he  won  fame,  but  gave  his 
congregation  no  peace  or  rest,  and  in  one 
place  after  another  they  turned  upon  him. 
His  most  important  pulpit  was  in  the  Hollis 
Street  Unitarian  Church  of  Boston.  "He 
was  liable  to  open  his  Hollis  Street  pulpit," 
says  a  writer,  "any  Sunday  morning  with 
either  or  both  temperance  or  slavery.  He 
preached  temperance  to  a  congregation  of 
men  who  drank  rum,  sold  rum,  made  rum 
.  .  .  of  course  he  gave  mortal  offence." 
And  again,  "His  fight  lasted  seven  years, 
one  man  against  many,  poverty  against 
wealth,  right  against  wrong."  At  last  he 
was  formally  placed  on  trial  by  an  ecclesi 
astical  council  for  "preaching  on  exciting 
topics,"  and  for  failing  to  conduct  himself 
"with  Christian  meekness."  The  exciting 
topics  were  "the  meanness  and  crime  which 
he  saw  about  him  in  high  places" !  The  im 
mediate  result  of  the  trial  was  a  vote  of  cen 
sure,  but  Pierpont  soon  left  the  church  for 
another,  far  away. 


CHILDHOOD  AND  YOUTH       17 

The  year  1861  saw  him  in  Boston  again, 
and  he  went  to  the  front  as  chaplain  of  the 
Twenty-second  Massachusetts  Kegiment. 
The  regiment  went  into  camp  on  the  north 
bank  of  the  Potomac.  It  was  shrewish  fall 
weather,  and  the  chaplain,  now  an  old  man, 
was  unable  to  endure  the  cold.  He  was  seen 
walking  about  most  of  the  night  beating  his 
body  with  his  hands  to  keep  his  blood  from 
freezing.  He  sent  in  an  application  to  the 
commander  of  the  brigade  for  three  days' 
leave,  intending  to  look  for  some  occupation 
in  Washington.  The  officer  had  never 
heard  of  him  and  sent  back  the  paper  with 
a  message  scrawled  across  the  back,  "Why 
does  he  want  three  days'?  Give  him  two." 
In  a  very  depressed  state  of  mind  the  old 
man  called  upon  Secretary  Chase  and  mod 
estly  inquired  if  there  was  not  some  clerical 
work  he  could  do.  The  secretary,  who  knew 
him  well  by  reputation,  shook  his  hand 
warmly,  agreed  to  do  anything  he  could  for 
him,  and  did,  in  fact,  provide  him  with  a 
work  of  compilation  for  the  Government 
which  occupied  the  elderly  clergyman  until 
his  death. 

Of  all  the  effort  and  struggle  of  this  man's 


18          J.  PIERPONT  MORGAN 

life  there  only  remains  a  school-book  piece 
of  verse — "Warren's  Address" — do  you  not 
recall  it? — beginning, 

Stand !     The  ground 's  your  own,  my  braves ! 

and  a  volume  of  poetry  entitled  "Airs  from 
Palestine,"  now  unread.  There  are  verses, 
however,  which  pulsate  with  the  vigour  of 
protest.  Here  is  a  specimen,  the  first  stanza 
of  "A  Word  from  a  Petitioner,"  which  has 
an  oddly  contemporaneous  sound : 

What !  our  petitions  spurned !     The  prayer 
Of  thousands — tens  of  thousands — cast 

Unheard  beneath  your  speaker's  chair! 
But  ye  will  hear  us,  first  or  last. 

The  thousands  that,  last  year,  ye  scorned, 
Are  millions  now.     Be  warned !     Be  warned ! 

Such  were  the  strong  feelings  and  the 
nature  of  J.  P.  Morgan's  grandfather. 
Threads  of  Pierpont's  personality  are  dis 
tinctly  to  be  seen,  however  entangled,  in  the 
later  man;  terribly  strong  feeling,  wilful- 
ness,  an  aspiration  for  the  beautiful,  in 
both. 

As  soon  as  Junius  Spencer  Morgan  grew 
up  his  father  obtained  a  clerkship  for  him 
with  the  banking  house  of  Morris  Ketcham. 


CHILDHOOD  AND  YOUTH       19 

The  young  man  remained  here  several  years, 
finally  leaving  to  become  a  junior  partner  in 
the  dry-goods  firm  of  Howe,  Mather  &  Co. 
in  his  native  town.  During  this  period  he 
married  Juliet  Pierpont,  the  clergyman's 
daughter,  and  their  child,  John  Pierpont 
Morgan,  was  born  April  17,  1837.  J.  S. 
Morgan  showed  great  business  ability  and 
was  soon  invited  to  become  a  partner  in  the 
house  of  J.  M.  Beebe  &  Co.,  one  of  the  largest 
retail  stores  in  Boston.  But  a  few  years 
later  he  met  George  Peabody,  the  great  Lon 
don  banker,  and  shortly  after  the  meeting, 
he  entered  Peabody 's  prosperous  firm. 

Peabody  was  American  born,  and  for  a 
long  time  was  a  merchant  of  Baltimore. 
After  he  became  well  established  in  the 
banking  business  in  London,  he  became 
widely  known  on  account  of  his  Fourth  of 
July  dinners,  which  he  gave  annually  for 
the  purpose  of  creating  good  feeling  between 
England  and  his  own  country.  One  of  these 
occasions  the  Duke  of  Wellington  honoured 
with  his  presence  and  Queen  Victoria  sent 
her  portrait  and  Prince  Albert's  to  hang  in 
the  dining  hall.  Peabody  was  the  most 
widely  known  philanthropist  of  his  day  and 


20          J.  PIERPONT  MORGAN 

gave  millions  for  the  housing  of  the  poor  in 
London  and  for  the  cause  of  education  in  the 
Southern  States  of  America.  On  his  visit 
to  Boston  he  was  in  reality  seeking  a  part 
ner  to  pave  the  way  for  his  own  retirement 
from  business ;  the  name  of  Junius  Morgan 
was  strongly  urged  upon  him  by  Morgan's 
friends — with  the  result  which  proved  so 
favourable  to  the  Morgan  fortunes.  One  of 
the  stipulations  in  their  agreement  at  the 
time  was  that  Junius  Morgan  should  take 
upon  himself  the  entertainment  of  the  firm's 
American  and  other  friends,  for  which  he 
was  to  receive  twenty-five  thousand  a  year 
as  expense  money. 

Young  J.  P.  Morgan  spent  the  first  four 
teen  years  of  his  life  in  Hartford.  The 
house  in  which  he  was  born  still  stands.  It 
was  a  small  and  unpretentious  building  of 
red  brick  which  stood  on  the  village  street 
in  the  centre  of  a  few  acres  of  land.  Some 
years  ago  it  was  raised  one  story  and  a  store 
was  set  in  under  it,  and  now  it  is  being 
closely  crowded  by  business  blocks  in  what 
is  the  centre  of  Hartford.  J.  P.  Morgan's 
associations  are  not  with  this  house,  how 
ever,  for  his  parents  only  lived  here  during 


CHILDHOOD  AND  YOUTH       21 

the  first  year  or  two,  then  they  moved  to  the 
large  and  comfortable  house  on  Farmington 
Avenue  which  Joseph  Morgan  had  had  built 
as  a  wedding  present  for  his  son.  Round 
it  lay  a  farm  of  about  one  hundred  acres 
which  extended  half  a  mile  to  the  west  to  a 
stream  called  Little  River.  At  the  age  of 
six  young  Morgan  was  sent  to  the  district 
school. 

As  a  boy  he  was  a  quiet,  reticent  person 
age  ;  one  who  went  about  his  own  affairs  and 
who  was  marked  neither  by  especial  bril 
liancy  nor  especial  dulness  at  his  studies. 

He  was  cool,  matter-of-fact,  and  stamped 
with  a  determined  quality  and  a  kind  of 
dignity  which  left  a  lasting  impression  upon 
the  memory  of  some  of  his  school-mates 
even  if  it  did  not  awe  them  very  much  at  the 
time.  The  first  thing  he  gained  at  school 
was  a  nickname — in  this  way.  The  roll 
of  the  class  was  being  called  and  one  by  one 
the  boys  stood  up  and  gave  their  names. 
It  came  Morgan's  turn: 

"  John  Pierpont  Morgan,"  he  announced. 
He  was  asked  to  say  it  again  because  of  his 
uncommon  middle  name.  " Pierpont,"  he 
repeated,  "John  Pierpont  Morgan." 


22          J.  PIERPONT  MORGAN 

The  teacher  got  it  correctly,  but  not  the 
other  boys.  They  saw  fun  in  that  mid 
dle  name.  "Pierp" — "Pip — Pip"  Morgan 
came  from  the  back  of  the  room  in  a  loud 
whisper,  and  "Pip"  Morgan  he  was  called, 
and  nothing  else,  from  that  day  on. 

"Pip"  Morgan  spent  most  of  his  spare 
time  fishing  in  Hog  Creek;  once  he  built 
himself  a  flat-bottomed,  pointed  skiff,  in 
which  he  used  to  float  about  in  the  muddy 
stream;  the  new  boat  was  better  than  the 
raft,  which  served  the  other  boys. 

At  the  age  of  twelve  he  was  a  well-grown, 
chunky  boy,  and  as  he  went  on  in  his  teens 
he  was  large  and  well  filled  out  for  his  age. 
But  after  a  time  his  health  began  to  suffer, 
he  lost  his  ruggedness  and  constitution,  and 
it  was  necessary  for  him  to  be  constantly 
under  a  doctor's  care. 

After  the  family  moved  to  Boston,  he 
attended  the  English  High  School  until  his 
graduation  in  1853.  The  next  year  he  spent 
at  Fayal  in  the  Azores  after  which  he  con 
tinued  his  education  abroad,  spending  a 
year  at  Vevay,  Switzerland,  and  two  years 
at  the  University  of  Gottingen  in  Germany. 
Here  he  also  received  a  treatment  of  mud 


CHILDHOOD  AND  YOUTH       23 

baths  which  proved  beneficial.  With  his 
health  much  improved  he  left  Gottingen  to 
enter  his  father's  banking  house  in  London. 
A  remark  which  his  father  made  at  this 
time  has  come  to  us  from  one  who  knew  the 
elder  Morgan — and  who  treasures  the  re 
mark  as  a  choice  example  of  life's  little 
ironies.  "I  don't  know,"  said  the  London 
banker,  "what  in  the  world  I  am  going  to 
do  with  Pierpont."  The  question  seems 
really  to  have  caused  him  unnecessary  anx 
iety.  He  was  also  concerned  about  his 
son's  abrupt  and  often  antagonising  man 
ner,  so  much  the  opposite  of  his  own.  His 
friends  assured  him  that  there  was  nothing 
to  be  done  about  this;  his  son's  way  was 
natural  to  him,  really  without  intentional 
offence,  a  part  of  his  constitution,  and  you 
could  not  turn  granite  into  wax.  At  this 
period  the  young  man  was  becoming  initi 
ated  into  the  technical  mysteries  of  his 
trade.  He  was  learning  what  bills  at  sixty 
days  on  Paris  or  Amsterdam  or  Hamburg 
were  worth  in  francs,  guilders,  the  marc 
banco,  and  so  on  through  all  the  delicately- 
balanced  system  of  foreign  exchanges,  which 
changed  from  day  to  day. 


24          J.  PIERPONT  MORGAN 

FAn  anecdote  shows  how  his  father  backed 
him  up  and  the  faith  of  the  older  man  in 
his  son's  business  judgment.  Someone  sug 
gested  to  young  J.  P.  that  coffee  was  a 
"good  speculation."  Mr.  Morgan  decided 
that  it  was,  too,  and  went  out  and  bought — a 
whole  shipload.  When  he  told  one  of  the 
partners  of  Peabody  &  Co.  what  he  had 
done  the  other  was  shocked. 

"Why,  it's  absurd,"  he  said,  "to  buy  all 
that  coffee — where  will  you  get  the  money?" 

Mr.  Morgan  stared  at  him  angrily  for  a 
moment  and  then  walked  out  of  the  room 
without  saying  a  word.  In  a  very  short 
time  he  came  back  with  a  draft  in  his  hand 
and  slapped  it  on  the  table  before  the  Eng 
lish  banker.  "There,"  he  said  sharply, 
"there  it  is." 

It  was  a  draft  for  the  full  amount  of  the 
I  large  sum  involved  in  the  transaction  signed 
LJby  Junius  Morgan. 

The  year  1857  saw  one  of  the  most  ter 
rible  financial  panics  which  ever  visited  the 
United  States.  At  this  time  the  house  of 
George  Peabody  &  Co.  was  doing  its  Ameri 
can  business  with  the  firm  of  Duncan,  Sher 
man  &  Co.  of  New  York'.  During  this  crisis 


CHILDHOOD  AND  YOUTH       25 

the  American  firm  couldn't  meet  its  matur 
ing  credits  in  London,  and  its  inability  to 
do  so  greatly  embarrassed  George  Peabody 
&  Co.  Under  this  strain  the  London  firm 
was  obliged  to  appeal  to  the  Bank  of  Eng 
land  for  assistance,  which  it  finally  received. 
The  outcome  of  it  all  was  the  sending  of 
young  Pierpont  to  America,  where  he  be 
came  cashier,  and  his  father's  representa 
tive,  with  the  firm  of  Duncan,  Sherman  & 
Co. 

Here  he  met  Mr.  Dabney,  the  man  whom 
he  afterward  selected  as  partner  wrhen  he 
went  into  business  for  himself.  Dabney 
was  one  of  the  most  expert  accountants  in 
the  city,  and  it  was  from  him  that  Mr. 
Morgan  acquired  his  remarkable  and  accu 
rate  knowledge  of  bookkeeping,  a  knowl 
edge  invaluable  to  him,  and  the  extent  of 
which,  together  with  the  resulting  ability  to 
analyse  accounts  and  statements  of  the  most 
intricate  character,  has  excited  the  wonder 
of  every  man  who  has  ever  come  in  contact 
with  him.  In  the  course  of  time  Junius 
Morgan  wrote  the  American  firm  suggesting 
that  they  give  his  son  a  partnership.  They 
—declined.  Here  Mr.  Morgan's  career 


26          J.  PIERPONT  MORGAN 

really  began ;  for,  soon  after,  his  father  di 
rected  him  to  take  an  inexpensive  office,  and 
agreed  to  turn  over  to  him,  gradually,  the 
entire  business  of  George  Peabody  &  Co. 

Two  paragraphs,  printed  in  the  columns 
of  the  Bankers'  Magazine  of  that  time, 
speak  for  themselves.  The  first  reads : 

"Messrs.  J.  Pierpont  Morgan  &  Co.  and 
Mr.  C.  H.  Dabney  (for  several  years  of  the 
firm  of  Duncan,  Sherman  &  Co.),  have  as 
sociated  together  as  bankers,  under  the  firm 
of  Dabney,  Morgan  &  Co.,  Exchange  Place." 

The  second  is:  "Messrs.  Duncan,  Sher 
man  &  Co.  have  transferred  their  London 
account,  late  with  Messrs.  George  Peabody 
&  Co.,  to  the  banking  firm  of  Messrs.  Fin- 
lay,  Hodgson  &  Co.,  a  concern  of  very  old 
and  wealthy  standing.  The  withdrawal  of 
Mr.  Peabody  and  his  large  capital  and  ex 
perience  will  doubtless  induce  a  number  of 
other  changes  in  American  accounts  in  Lon 
don."  As  Junius  Morgan  continued  the 
Peabody  business,  taking  it  direct  from 
George  Peabody 's  hands,  this  was  revenge. 
But  the  firm  of  Duncan,  Sherman  &  Co. 
was  even  then  in  sight  of  the  failure  which 
afterward  overcame  it. 


CHILDHOOD  AND  YOUTH       27 

Besides  Mr.  Dabney,  Mr.  Morgan  had  for 
a  partner  his  cousin,  James  Goodwin,  now 
of  Hartford.  The  office  of  the  new  firm 
was  on  the  second  floor  of  Number  50  Ex 
change  Place,  and  even  for  the  days  wrhen 
' ' model"  office  buildings  were  three  stories 
high,  could  not  have  been  called  palatial. 
The  big  firms  had  their  offices  on  Wall  Street 
or  on  William  Street.  There  is  nothing  in 
Mr.  Morgan's  career  in  these  earlier  days 
which  suggests  that  he  had  at  that  time  the 
slightest  comprehension  of  what  his  rela 
tions  as  a  banker  and  a  constructive  force, 
either  in  the  world  of  railway  affairs,  or  in 
industrial  development,  was  to  be.  He 
looked  upon  himself  then,  as  in  fact  he  al 
ways  did  until  he  \vas  forced  by  imperative 
pressure  to  lead  in  the  reorganisation  of 
bankrupt  railroads,  as  a  banker  pure  and 
simple. 

In  the  summer  of  1859  Mr.  Morgan  sailed 
for  Paris  to  see  the  lady  who  was  soon  to 
become  his  wife.  She  was  Miss  Amelia 
Sturges,  the  daughter  of  Jonathan  Sturges 
of  New  York.  Miss  Sturges  was  an  in 
valid  ;  in  reality  she  was  dying  of  consump 
tion.  Mr.  Morgan  persuaded  her  to  marry 


28          J.  PIERPONT  MORGAN 

him,  declaring  that  he  would  take  her  the 
world  over  to  find  her  health.  He  dropped 
business  entirely  after  his  marriage  and  de 
voted  himself  to  the  dying  woman.  She 
lived  only  a  few  months  after  their  wedding. 

He  returned  to  New  York  and  plunged 
into  his  work  again.  He  lived  quietly,  be 
ginning  the  day  with  a  horseback  ride  in 
Central  Park  and  often  spending  the  even 
ing  at  the  house  of  one  of  his  friends.  His 
interest  in  pictures,  always  strong,  occupied 
him  much  at  this  time.  He  bought  his  first 
oil  painting  at  the  Sanitary  Commission 
Fair,  held  in  a  big,  temporary  structure  on 
Fourteenth  Street.  It  was  the  portrait  of  a 
young  and  delicate  looking  woman,  the 
work  of  an  artist  named  Baker,  and  the 
price  was  $1,500.  The  picture  hung  for 
many  years  over  the  mantel  in  the  library 
of  Morgan's  home,  at  42  West  21st  Street. 

His  first  striking  transaction  occurred 
after  the  breaking  out  of  the  war,  and  about 
the  time  that  Charleston,  S.  C.,  was  block 
aded.  Gold  was  commanding  a  premium, 
but  it  was  thought  that  Charleston  would 
fall,  and  with  it,  the  premium  on  gold. 
With  this  idea  strongly  in  mind  the  impor- 


CHILDHOOD  AND  YOUTH       29 

ters  who  owed  money  abroad  were  putting 
off  from  day  to  day  their  remittances  to 
meet  their  maturing  bills,  hoping  to  coin 
their  remittances  in  gold  later  on  at  a  much 
lower  price  than  the  market  then  afforded. 
But  gradually  the  truth  dawned  upon  them 
that  Charleston  was  not  going  to  fall. 
Meanwhile  the  price  of  exchange  was  begin 
ning  to  force  gold  shipments  to  London, 
which  made  matters  much  worse,  since 
every  shipment  of  gold  tended  to  force  up 
its  price. 

The  favorite  place  to  watch  this  terrify 
ing  upward  movement  was  the  "gold  room. " 
This  peculiar  institution  was  a  private  en 
terprise,  kept  by  a  man  named  Gallagher  in 
a  building  at  the  corner  of  William  Street 
and  Exchange  Place.  Anyone  could  deal  in 
the  gold  room  after  paying  a  fee  of  twenty- 
five  dollars  a  year.  It  was  open  all  day, 
whereas  the  Stock  Exchange,  which  then 
held  two  sessions,  closed  its  morning  session 
at  twelve  and  was  open  again  for  only  a 
short  time  in  the  afternoon.  According  to 
the  custom  of  that  time,  the  presiding  officer 
of  the  'Change  simply  called  down  a  list  of 
stocks,  and  the  brokers,  gathered  in  a  kind 


30          J.  PIEKPONT  MORGAN 

of  pit,  bought  and  sold  their  stock  when  the 
officers  reached  its  name.  Gold  was  last  on 
the  list,  and  the  form  of  routine  was  alto 
gether  too  slow  and  unwieldly  on  the  regu 
lar  exchange  to  take  care  of  the  feverish 
business  in  that  commodity. 

To  those  in  daily  touch  with  the  gold  room 
it  became  evident  that  a  crisis  was  coming 
fast  upon  those  importers  with  their  de 
layed  remittances.  The  movement  was 
sharpened  by  small  shipments  of  gold,  and 
it  was  very  clear  that  if  any  large  shipment 
took  place  the  importers  would  throw  up 
their  hands  in  a  panic  and  rush  to  buy  gold 
to  save  their  skins. 

There  was  a  young  fellow  among  the 
watchers  whose  sharp  sight  took  this  in;  it 
was  E.  B.  Ketcham,  of  the  banking  house  of 
Ketcham,  Son  &  Co.,  and  a  friend  of  J.  P. 
Morgan's.  He  went  to  Mr.  Morgan,  and 
this  is  what  took  place : 

"What's  the  condition  of  the  exchange 
market?"  Ketcham  inquired  first. 

"Very  anxious,"  replied  Mr.  Morgan. 

"How  good  is  your  exchange  credit — how 
much  exchange  could  you  market?" 


CHILDHOOD  AND  YOUTH       31 

"Two  or  three  millions,"  said  Mr.  Mor 
gan. 

"I've  got  an  idea,  which  I  think  worth 
considering,"  went  on  the  other:  "Sup 
pose  we  buy  a  couple  of  millions  of  gold  and 
ship  it  abroad  on  next  Saturday's  steamer. 
You  haven't  got  the  money  to  ship  the  gold, 
but  our  firm  has.  We'll  make  it  a  joint  ac 
count  with  Peabody  &  Co.  and  yourself. 
The  result  will  be  to  advance  the  price  of 
gold  several  points  and  to  give  you  a  clear, 
exclusive  exchange  market  to  draw  against 
on  shipment,  which  will  reimburse  us  within 
a  week,  with  a  big  profit  on  the  gold  we  pur 
chased." 

The  proposal  thoroughly  appealed  to  Mr. 
Morgan's  business  judgment.  As  a  result 
the  two  young  men  journeyed  up  to  West- 
port,  Conn.,  that  afternoon,  to  talk  the  mat 
ter  over  writh  the  senior  partner  of  the 
Ketcham  house.  This  was  Morris  Ketch- 
am,  with  whom  Junius  S.  begun  in  business. 
The  older  man  soon  consented,  saying :  "If 
you  boys  think  you  are  right,  go  ahead." 

It  was  very  necessary  to  go  ahead  cau 
tiously  to  prevent  the  plan  from  becoming 


32          J.  PIERPONT  MOEGAN 

known.  In  shipping  gold  double  eagles 
were  used — you  had  to  go  to  a  bullion 
dealer  and  buy  the  exchange  for  the  ordi 
nary  run  of  gold,  paying  a  slight  premium. 
Thus  either  Morgan  or  Ketcham  had  to  ap 
pear  as  a  buyer  of  double  eagles,  the  only 
possible  use  of  which  was  to  ship  abroad. 
The  bullion  dealers  got  some  inkling,  but  the 
purchases  were  timed  when  other  shipments 
were  taking  place,  so  far  as  could  be  done. 
And  the  following  Saturday  saw  the  gold 
shipped,  two  millions  of  it. 

Almost  immediately  there  was  an  advance 
in  the  price,  and  yet,  when  the  traders  met 
in  the  gold  room  on  Monday  morning,  things 
were  unaccountably  quiet.  Mr.  Morgan  be 
came  impatient,  even  nervous.  "What  do 
you  think?  What  do  you  think?"  he  whis 
pered  to  his  partner  in  the  deal.  They 
waited.  At  the  Stock  Exchange  was  a  man 
from  Ketcham  &  Co.  under  orders  to  buy 
enough  gold  to  put  it  at  a  certain  point. 
Both  speculators  knew  the  hour  when  gold 
would  be  reached  in  the  trading.  But  sud 
denly  the  bidding  broke  out  in  the  gold  room 
itself. 

"Ill  sell  half  a  million,"  said  a  man, 


CHILDHOOD  AND  YOUTH       33 

"notwithstanding  the  large  amount  of  ship 
ment/' 

"I'll  take  that  half  million  and  another 
half  million  at  a  half  per  cent,  higher,"  an 
swered  Mr.  Morgan's  partner,  promptly, 
and,  after  that,  there  were  no  more  attempts 
to  break  the  price.  The  importers  now  fell 
into  line;  they  had  put  off  their  exchange 
operations  so  long  that  they  were  now 
obliged  to  draw  sight  exchange  and  Mr. 
Morgan  was  the  only  one  who  could  give  it. 
In  less  than  two  weeks  the  money  used  in 
the  gold  purchased  was  recouped  by  the  sale 
of  Mr.  Morgan's  exchange,  and  the  transac 
tion  was  closed  up  with  a  profit  of  a  hun 
dred  and  sixty  thousand  dollars — which  was 
considered  big  business  in  those  days. 


CHAPTER  II 

BANKING  DURING  THE  CIVIL   WAR 

THERE  is  a  thoughtless  saying,  which  is 
only  partly  true,  that  Mr.  Morgan  is 
not  a  self-made  man.  With  him,  indeed, 
there  was  never  anything  resembling  the 
famous  Rockefeller  account  book — nine  dol 
lars  and  eighty  cents  this  month  received, 
five  sixty  expended  "for  necessities, "  —bal 
ance,  four-twenty  toward  the  distant  Palace 
of  Ambition — written  out  in  a  cramped, 
clear,  boyish  hand.  From  the  first,  he  stood 
at  a  certain  height  above  the  crowd,  and  be 
gan  life  in  New  York  easily,  possessing  all 
the  advantages  and  claims  of  a  successful 
banker's  idolised  son. 

But  although  the  name  and  business  con 
nections  of  Junius  Morgan  furnished  him 
with  a  substantial  pedestal,  Pierpont  Mor 
gan  has  made  it  a  mountain,  and  withdrawn 
to  the  very  top  with  his  allurement  of  the 
Midas  touch.  There  capital  seeks  to  follow, 

34 


BANKING  DURING  CIVIL  WAR    35 

and  really  competes  for  the  notice  of  the  all- 
powerful  individual  whose  name  carries 
conviction  and  stands  for  success.  The 
Morgan  name,  coupled  with  an  enterprise, 
is  reckoned  as  much  an  asset  as  stores  of 
gold.  And  this  enchantment  is  his  own 
work.  By  virtue  of  all  that  separates  his 
commonplace,  if  comfortable,  inherited  po 
sition  from  his  Cyclopean  influence  and  au 
thority  to-day,  Mr.  Morgan  is  "self-made." 

His  growth  was  slow;  it  occupied  all  of 
fifty  years,  counting  from  the  year  he  began 
as  a  banker's  clerk  in  '57.  He  went  on  do 
ing  harder  and  harder  things,  and  as  his  life 
has  been  built  up  in  that  way,  the  conse 
quence  is  that  when  we  go  back  to  the  period 
to  be  dealt  with  in  the  present  chapter — that 
of  the  Civil  War,  and  shortly  after — we  go 
back  to  an  astute  and  terribly  efficient  per 
sonality,  but  nothing  like  the  Morgan  of 
to-day.  Not  outwardly.  With  all  his  un 
conscious  egoism,  he  subordinated  himself, 
first  to  his  father,  and  afterwards  to  the 
Drexels,  and  he  was  middle-aged  before  he 
became  quite  his  own  master  and  was  ut 
terly  free. 

As  a  young  man  he  was  as  restive  as  a 


36          J.  PIEEPONT  MOEGAN 

youthful  athlete  who  has  not  yet  tried  his 
strength  and  powers  at  a  meet;  intense 
physical  and  mental  energy,  an  abrupt  and 
sure  way  of  going  after  things,  whether  it 
was  the  little  matter  of  playing  petits  che- 
vaux  in  the  kursaal  at  a  franc  a  play  when 
he  was  at  Feligh's  School  at  Vevay,  Switzer 
land,  or  some  complex  piece  of  banking 
which  came  to  his  hand  at  the  beginning  of 
his  career,  when  he  was  clerk  for  Duncan, 
Sherman  &  Co. 

The  year  he  came  to  New  York  was  the 
year  of  a  terrible  crisis  in  Wall  Street; 
beginning  with  the  crash  of  the  Ohio  Life 
and  Trust  Company  in  midsummer,  1857, 
nine  hundred  failures  were  reported.  At 
one  time  the  great  London  firm  of  Pea- 
body  &  Co.,  in  which  the  fortune  of  Mor 
gan's  father  was  bound  up,  was  known  to 
be  in  extremis;  it  was  perfectly  solvent, 
but,  like  other  firms,  it  had  for  the  time  to 
lie  out  of  its  money  and  could  not  meet  its 
engagements.  It  was  predicted  that  the 
fall  of  Peabody  &  Co.  would  start  a  general 
panic  in  London.  But  the  suspension  of 
the  Banking  Act  enabled  the  Bank  of  Eng 
land  to  advance  Mr.  Peabody  one  million 


BANKING  DURING  CIVIL  WAE     37 

pounds,  which  saved  the  situation  in  that 
quarter.  In  New  York,  however,  there  was 
no  such  relief.  The  banks  took  alarm  and 
convulsively  stopped  short  their  customary 
advances;  commercial  houses  went  down 
by  dozens;  and  then  the  public  caught  the 
panic  and,  turning  upon  the  banks,  began  a 
run  for  their  deposits.  The  banks,  in  turn, 
found  they  could  no  more  conduct  their 
business  without  credit  or  faith  than  their 
customers,  the  merchants,  could,  and  a  gen 
eral  suspension  of  specie  payment  had  to 
follow. 

The  very  means  which  the  bankers  took 
to  prepare  against  a  run  produced  a  run 
and  closed  their  doors.  A  week  before  they 
were  forced  to  suspend,  they  announced 
that  they  would  change  their  policy  and  meet 
the  panic  by  its  natural  remedy — a  reason 
able  expansion  of  credit;  and  it  was  the 
publication  of  their  returns  in  the  week 
following,  showing  in  all  the  plainness  of 
print  that  instead  of  expanding  they  were 
carrying  the  refusal  of  credit  still  further, 
which  brought  the  public  down  with  a  howl 
upon  their  doors. 

As  an  object  lesson  this  panic  of  1857 


38          J.  PIERPONT  MORGAN 

was  clean-cut  and  decided.  And  it  was 
Morgan's  initiation  into  the  wild  and  tragic 
possibilities  of  a  financial  hurricane.  He 
was  a  clerk,  twenty  years  old,  at  the  time, 
but  he  studied  and  thought  out  every  phase 
of  the  situation,  and  there  are  men  now 
living,  bankers  of  an  elder  day,  who  recall 
his  eager  and  persistent  questioning  as  to 
the  why  and  wherefore  of  the  steps  they 
took  then.  In  spite  of  his  youth  he  did  not 
seem  tempted  to  criticise;  he  wanted  an 
swers  to  his  questions,  but  kept  his  conclu 
sions  to  himself. 

The  storm  passed  and  business  went 
calmly  and  solidly  ahead  for  three  years 
more.  Moses  Taylor  taught  the  bankers 
of  New  York  the  invaluable  advantages 
of  cooperation  by  means  of  a  Clearing 
House  association.  Commodore  Vander- 
bilt  had  his  fleet  of  sixty  ships.  Trenor 
W.  Park  constructed  a  short  route  to 
California,  by  means  of  a  railroad  forty 
miles  long  across  the  Isthmus  of  Panama. 
A.  A.  Low,  father  of  Seth  Low,  was  build 
ing  up  foreign  commerce,  sending  packet 
ships  to  China  and  the  Par  East ;  and  there 
was  a  rapid  development  of  ocean  steam- 


BANKING  DURING  CIVIL  WAR     39 

ship  service  between  Boston,  New  York,  and 
Liverpool  and  Continental  ports.  At  that 
time  the  greater  part  of  our  foreign  ex 
change  represented  exports  of  cotton,  and 
the  phrase  " Cotton  is  King"  was  invented. 
There  were  few  banking  houses  in  New 
York  doing  an  international  business  and, 
almost  without  exception,  every  one  of  that 
day  is  now  known  only  by  tradition.  Dun 
can,  Sherman  &  Co.,  by  whom  young  Mor 
gan  was  employed,  was  borne  safely  out  of 
the  panic  on  the  broad  shoulders  of  Pea- 
body  &  Co.,  but  disappeared  in  the  years  of 
depression  which  followed  the  still  greater 
panic  of  73. 

The  railway  mania  had  not  yet  begun ;  in 
the  East,  the  Pennsylvania,  and,  to  some 
extent,  the  Baltimore  &  Ohio,  were  begin 
ning  to  feel  their  way  toward  the  develop 
ment  of  the  Middle  West,  but  the  roads 
were  disjointed,  straggling,  tentative  ex 
periments,  and  the  varieties  of  gauge  and 
the  grotesque  differences  in  the  make  of 
cars  made  it  impossible  to  carry  through 
freight  from  Chicago,  then  a  young  city, 
making  her  own  future,  or  from  Cincinnati, 
to  the  East,  without  dozens  of  changes  of 


40          J.  PIERPONT  MORGAN 

traffic  and  continuous  expense  and  delay. 
The  Harlem  railroad  was  about  bankrupt; 
the  New  Haven  system  was  undreamed  of, 
the  railroad  consisting  entirely  of  a  line 
stretching  from  the  Bronx  River  to  New 
Haven,  sixty-two  miles  away. 

Mr.  Morgan's  cousin,  E.  D.  Morgan,  who 
became  Governor  of  New  York  just  before 
the  War,  and  who  was  afterwards  United 
States  Senator,  was  directing  the  unfortu 
nate  Hudson  River  Railroad,  as,  earlier, 
Sam  Sloan  had  done.  Many  thought  that 
this  railroad  was  a  monument  of  folly,  rep 
resenting  a  mad  investment  of  capital,  since 
it  was  not  conceivable  that  a  line  running 
along  the  banks  of  the  Hudson  could  suc 
cessfully  compete  with  water  navigation. 

With  these  developments  Mr.  Morgan 
had  little  practical  concern  for  the  moment. 
His  face  was  turned  toward  Europe  and  the 
exchange  market  in  financial  centres  across 
the  water.  A  banker,  such  as  he  was,  was 
just  as  necessary  to  the  movement  of  for 
eign  commerce  as  the  ships  which  carried 
the  trade.  Foreign  exchange,  in  a  sentence, 
is  an  evidence  of  indebtedness  represented 
by  a  negotiable  paper;  its  object  is  to  re- 


BANKING  DURING  CIVIL  WAR    41 

move  the  burden  of  shipping  coin.  When 
we  export  cotton,  a  credit  is  opened  with 
the  English  buyer,  who  arranges  with  his 
banker  to  accept  drafts  of  the  American 
dealer,  and  notifies  the  American  cotton 
dealer  to  draw  his  sixty-day  bill  on  the  Lon 
don  bank,  with  shipping  documents  at 
tached.  The  New  York  banker  buys  this 
bill  of  the  dealer,  thus  supplying  Mm,  with 
out  trouble  and  at  a  small  charge,  the  neces 
sary  cash  to  pay  the  farmer  who  raised  the 
cotton.  The  dealer  in  exchange  brings  to 
gether  a  customer  in  London,  or  it  may  be 
in  Batavia,  Siam,  or  the  coast  of  Africa,— 
and  a  seller  in  the  United  States;  the  two 
practically  stand  in  front  of  his  desk  and 
receive  what  is  justly  due  them,  although 
they  may  actually  be  ten  thousand  miles 
apart.  It  was  this  kind  of  business  which 
occupied  Mr.  Morgan  throughout  his  early 
career,  and  he  learned  it  thoroughly  in  all 
its  manifold  ramifications.  He  kept  stead 
ily  at  it  when  the  War  broke  out. 

Salmon  P.  Chase,  Lincoln's  Secretary  of 
the  Treasury,  came  to  New  York  after  the 
defeat  at  Bull  Run  and  appealed  to  the 
bankers  of  the  Clearing  House  Association 


42          J.  PIERPONT  MOEGAN 

to  stand  by  the  Government  in  the  fearful 
emergency  which  had  arisen.  The  Federal 
credit  had  sunk  below  that  of  private  prop 
erty;  Europe  thought  the  Government 
doomed,  the  whole  fraternity  of  the  Roths 
childs  shut  their  fists  and  treated  the  risk 
of  loaning  money  to  the  United  States  about 
as  a  modern  banker  would  treat  a  proposal 
to  purchase  the  bonds  of  the  old  Confeder 
acy.  The  Secretary  met  the  bankers  in  the 
directors'  room  over  the  main  banking  office 
of  the  American  Exchange  Bank,  and  said 
to  them: 

"There  is  really  more  need  of  gold  right 
now  than  of  troops.  The  Confederacy  ex 
pects  to  secure  gold  by  sending  cotton  to 
Europe ;  and,  until  we  can  build  a  navy,  we 
can  barely  interfere  with  the  export.  We  of 
the  North  have  no  cotton.  What  are  we  to 
do?  I  am  not  a  financier;  I  can  only  ad 
minister  funds.  You  bankers  of  New  York 
must  show  the  Federal  Government  how  to 
get  this  gold,  or  we  shall  go  on  the  rocks  to 
gether!" 

Wall  Street  came  to  the  front — at  twelve 
per  cent,  interest ;  even  at  that  price  it  was 
no  child's  play  raising  the  wind.  For  there 


BANKING  DURING  CIVIL  WAR    43 

were  people  in  every  group  who  thought 
they  saw  the  nation  crumbling  to  pieces. 
Mr.  Morgan  was  a  Republican  in  politics 
and  had  plenty  of  faith  in  the  survival  of  the 
Union.  Although  he  played  no  important 
part  in  financing  Government  loans,  he  en 
gaged  to  secure  gold  from  Europe,  having 
established  his  own  banking  firm  early  in 
the  War,  and  beyond  this  he  kept  the  house 
of  Peabody  &  Co.  thoroughly  informed,  not 
merely  about  the  work  of  the  army,  but  also 
concerning  the  financial  condition  of  the 
country,  our  sources  of  strength,  our  ability 
to  meet  any  taxation,  and  the  certainty  that 
no  ruinous  issues  of  Government  bonds 
would  ever  be  made.  All  of  which  had  its 
effect  and  reached  a  tangible  result,  in  the 
following  way. 

Charles  Francis  Adams,  then  Minister 
from  the  United  States  to  Great  Britain, 
had  protested  vigorously  against  the  con 
struction  of  ships  designed,  as  he  said,  for 
service  as  Confederate  cruisers,  and  par 
ticularly  against  permitting  these  ships  to 
sail  from  British  waters  upon  their  pri 
vateering  cruises.  As  Minister,  he  had 
gone  so  far  as  to  say  that  this  would  be  re- 


44          J.  PIERPONT  MORGAN 

garded  by  the  Washington  Government 
as  an  unfriendly  act,  an  act  of  purposed 
unfriendliness.  The  British  Government, 
unable  to  answer  the  logic  that  was 
in  Adams's  protest,  set  up  a  demand  that 
he  should  deliver  to  it  a  million  pounds  in 
gold  as  a  protection  fund  out  of  which  any 
possible  damages  could  be  paid.  The  Brit 
ish  insisted  that  the  money  should  be  turned 
over  within  five  days — an  apparently 
impossible  condition,  inasmuch  as  Adams 
could  not  communicate  with  the  United 
States  in  less  than  two  weeks,  and  of 
course  could  not  personally  command  so 
great  an  amount  of  gold  as  that.  He  saw 
that  he  was  in  a  trap,  since  he  could  not 
deny  England's  right  to  have  a  money  se 
curity  against  possible  damages. 

In  this  intensely  serious  predicament 
Adams  sought  help  from  the  London 
bankers,  but  it  was  not  forthcoming.  At 
last,  however,  he  received  in  secret  a  rep 
resentative  of  Peabody  &  Co.,  who  brought 
the  information  that  the  American  firm  was 
ready  to  advance  him  five  million  dollars  in 
gold,  and  would  do  it  immediately,  upon  the 
sole  condition  that  the  transaction  should 


BANKING  DURING  CIVIL  WAR     45 

be  absolutely  confidential.  No  one  else,  ex 
cept  President  Lincoln  and  Secretary  Sew- 
ard,  was  to  know  one  word  about  it.  The 
only  security  asked  was  Mr.  Adams's  re 
ceipt,  signed  as  American  minister.  The 
gold  was,  within  a  day,  delivered ;  and  Great 
Britain  was  compelled  to  place  an  embargo 
upon  all  of  the  suspected  privateers. 

The  late  Frederick  D.  Tappan  once  said 
that  he  wTas  impressed  in  the  early  days  of 
the  Civil  War,  by  the  absolute  faith  and  the 
spirit  that  is  nowadays  called  optimism 
which  the  young  son  of  Junius  Morgan  was 
at  that  time  revealing.  He  remarked  that 
although  Mr.  Morgan  was  then,  as  always, 
a  man  of  few  words,  yet  it  was  impressive 
to  hear  him  express  his  firm  belief,  not  only 
in  the  ultimate  success  of  the  United  States, 
but  also  in  the  irresistible  resources  of  the 
country,  which  he  was  certain  would  prove 
ample  to  meet  any  imaginable  cost  to  press 
the  fighting  to  the  end. 

"We  are  going  some  day  to  show  our 
selves  to  be  the  richest  country  in  the 
world  in  natural  resources,"  said  Mr.  Mor 
gan,  with  his  sharp,  staccato  emphasis.  "It 
will  be  necessary  to  go  to  work,  and  to  work 


46          J.  PIEEPONT  MORGAN 

hard,  to  turn  our  resources  into  money,  to 
pay  the  cost  of  the  War,  just  as  soon  as  it 
is  ended/' 

To  realise  what  this  means  it  is  neces 
sary  to  recall  the  fact  that  as  late  as  Sep 
tember,  1864,  the  London  Times  considered 
that  the  holders  of  the  Erlanger  Confeder 
ate  bonds  were  better  off  than  the  holders  of 
Federal  securities. 

Mr.  Morgan  was  not  in  the  way  of  doing 
Government  business  at  this  time;  he  kept 
strictly  to  his  own  path,  and  politics  he 
disliked  with  a  constitutional  malaise.  The 
conditions  required  a  very  cautious  and  far- 
seeing  management ;  almost  incalculable 
factors  ^nd  abrupt  changes  entered  into  the 
daily  business.  The  bankers  and  the  Gov 
ernment  were  both  involved  in  a  web  of  dif 
ficulties,  which  Congress  sought  to  relieve 
by  legislation,  some  of  which  only  aggra 
vated  the  trouble.  Senator  John  Sherman 
secured  the  passage  of  an  act  making  green 
backs  legal  tender  upon  the  Government 
"fiat,"  and  this  and  the  creation  of  the  na 
tional  banking  system  in  '63  proved  instantly 
helpful,  supplying  the  country  which,  hav 
ing  no  fractional  currency,  had  been  mak- 


BANKING  DURING  CIVIL  WAR    47 

ing  use  of  postage  stamps  and  various  to 
kens,  with  ample  money.  On  the  other 
hand,  the  suspension  of  specie  payment,  the 
scarcity  of  gold  as  measured  by  paper 
money,  put  gold  at  a  premium  and  led  to 
fevered  speculation  in  the  latter  precious 
commodity.  Speculation  in  gold  was  at 
tacked  as  a  national  evil ;  the  stock  exchange 
refused  to  allow  it,  but  the  gold  speculators 
got  together  in  the  Gold  Room  and  did  a 
greater  volume  of  business  than  ever. 
Then  Congress  outdid  itself  by  passing,  in 
June,  1864,  the  famous  Gold  Act,  which 
made  it  a  crime  to  buy  or  sell  gold.  But 
this  action  did  utter  violence  to  the  business 
judgment  of  the  bankers  throughout  the 
country;  they  were  ready  to  discourage 
gold  speculation,  but  to  forbid  it  was  ab 
surd,  because  if  gold  could  not  be  offered 
in  the  open  market  at  any  time  no  one  would 
know  what  it  was  worth,  and  every  one  who 
possessed  any  would  simply  lock  it  up  and 
hoard  it. 

The  New  York  bankers,  J.  P.  Morgan 
among  them,  characterised  this  proceed 
ing  on  the  part  of  Congress  in  the  following 
way: 


48          J.  PIERPONT  MORGAN 

"It  is  one  of  the  most  extraordinary 
and  visionary  acts  of  legislation  ever 
passed  in  this  country,  or  in  any  other 
country.  So  far  from  aiding  the  Govern 
ment  in  its  design  to  put  down  speculation 
among  brokers  and  speculators,  it  has 
had,  and  will  continue  to  have,  an  entirely 
different  effect.  The  rate  in  Wall  Street 
immediately  advanced  to  200,  205,  210,  and, 
in  fact,  to  225.  This  Gold  Act  is  only  one 
more  instance  of  utter  lawlessness  on  the 
part  of  Congress  to  interfere  with  the 
ordinary  business  transactions  of  a  commer 
cial  city.  The  cause  of  the  rise  in  gold  does 
not,  did  not,  arise  in  Wall  Street.  The 
cause  was  the  unwise  issue  of  several  hun 
dred  millions  of  paper  currency  at  Wash 
ington  and  in  the  enormous  importations 
following  the  uncalled  for  inflation." 

The  agitation  and  alarm  spread  rapidly, 
and  as  the  facts  were  all  with  Wall  Street 
in  this  instance,  Congress  was  put  to  the 
humiliation  of  repealing  the  law  within  a 
few  weeks.  The  effect  of  the  experiment 
on  Mr.  Morgan's  mind  was  lasting. 

We  have  related  in  the  first  chapter  how 
Mr.  Morgan  went  into  business  for  himself 


BANKING  DURING  CIVIL  WAR     49 

at  53  Exchange  Place  under  the  firm 
name  of  J.  P.  Morgan  &  Co.,  and  how  the 
firm  was  afterwards  changed  to  Dabney, 
Morgan  &  Co.  An  account  of  his  first 
marriage  was  also  given.  In  the  year  1865 
he  married  again,  and  his  second  wife,  the 
present  Mrs.  Morgan,  was  Miss  Frances 
Louise  Tracy,  daughter  of  Charles  Tracy, 
a  lawyer  in  New  York.  The  Morgans  went 
to  live  at  No.  227  Madison  Avenue.  They 
lived  rather  quietly,  and  Morgan  himself 
was  seldom  seen  in  public  places.  The 
number  of  his  acquaintances  was  compara 
tively  limited  and  he  had  few  close  friend 
ships  outside  of  his  own  family.  He  had 
three  sisters  living,  all  younger  than  him 
self;  Sarah  Spencer  Morgan,  who  married 
George  Hale  Morgan  in  1866 ;  Mary  Lyman 
Morgan,  who  married  Walter  Haynes 
Burns  in  '67 ;  and  Juliet  Pierpont  Morgan, 
who  afterwards  became  the  wife  of  the  Rev. 
John  B.  Morgan.  His  only  brother,  Ju- 
nius,  died  at  the  age  of  twelve.  To  his  sis 
ters — Mrs.  Burns  and  Mrs.  John  B.  Morgan 
are  still  living — he  was,  and  always  has 
been,  very  personally  devoted. 

At  the  time  of  his  second  marriage  he 


50          J.  PIERPONT  MORGAN 

was  stout  in  appearance,  in  good  health, 
and  wore  a  moustache.  At  least  once  in 
every  year  he  crossed  to  London  to  discuss 
the  details  of  the  banking  business  with  his 
father,  who  was  now  head  of  the  London 
house,  which  had  been  Peabody  &  Go.  In 
the  year  1866  his  daughter  Louisa  Pierpont 
Morgan,  now  Mrs.  Herbert  Satterlee,  was 
born,  and  in  1867,  his  son  John  Pierpont 
Morgan,  Jr.,  now  known  as  Jack  Morgan, 
and  pointed  to  as  his  father's  successor. 

Quietly  industrious,  prosperous,  invin 
cibly  energetic,  yet  fully  content  to  pour 
the  full  stream  of  his  energies  into  ordi 
nary  business  affairs,  Mr.  Morgan  was 
nearing  thirty,  without  having  given  more 
than  a  hint  of  his  true  powers.  From  this 
time  on,  however,  he  slowly  began  to  take 
his  place  in  the  bigness  and  vastness  of  the 
sweeping  development  of  the  country;  like 
a  spring  flood,  a  fresh  stream  of  business 
enterprises  burst  forth  when  Lee  surren 
dered,  and  in  all  the  years  that  followed 
Mr.  Morgan  is  found  progressing  in  the 
very  centre  of  the  current,  bringing  his  per 
sonality  more  and  more  to  bear  upon  its 


BANKING  DUEING  CIVIL  WAR     51 

direction,  and  emphasising  the  growing 
tendency  to  cooperation  which  was  destined 
eventually  to  characterise  -the  total  move 
ment. 


CHAPTER  III 

THE  KAILEOAD  WRECKERS 

r|1HB  railway  mania  struck  the  country 
JL  in  '66,  and  it  was  in  '69  that  Morgan 
first  "got  into"  railroads.  The  achieve 
ment  which  first  attracted  attention  to 
him  as  a  man  of  original  capacity  for  deal 
ing  with  very  difficult  railway  problems, 
in  such  a  way  as  to  save  railway  properties 
from  the  predatory  hands  which,  for  some 
years  after  the  close  of  the  Civil  War,  had 
been  occupied  in  wrecking  railway  proper 
ties  to  make  fortunes  in  the  process,  was 
the  sensational  Albany  &  Susquehanna  Rail 
way  fight  for  control. 

It  was  primitive  warfare  with  modern 
weapons. 

It  involved  a  direct  challenge  to  battle 
with  two  of  the  ablest  and  most  unscrupu 
lous  of  the  men  who  had  come  to  Wall 
Street,  bent  upon  reckless  manipulation. 

Mr.    Morgan    was    of    about    the    same 

52 


THE  RAILROAD  WRECKERS     53 

age  as  Jay  Gould  and  a  little  younger  than 
"Admiral"  Jim  Fisk,  alias  the  "Prince  of 
Erie."  Morgan  had  been  occupied  for  ten 
years  exclusively  with  the  kind  of  bank 
ing  which  private  bankers  were  accustomed 
to  follow.  He  had  gained  in  that  time  a 
reputation  for  very  conservative  manage 
ment  and  as  a  banker  exceedingly  sensitive 
to  credit.  It  was  then  said  of  him  that, 
except  as  a  matter  of  record,  it  was  not  es 
sential  to  put  any  promise  or  statement  of 
his  in  writing. 

On  the  other  hand,  Gould  and  Fisk  had 
gained  notoriety  for  their  brilliant  daring, 
for  their  unscrupulous  methods,  and  for 
the  swiftness  and  ability  with  which  they 
were  able  to  wreck  railroad  properties. 
Furthermore,  Gould  was  even  then  the  best 
hated  and  the  most  greatly  feared  man  in 
the  Wall  Street  district.  Black  Friday  and 
the  Gold  Corner  were  synonymous  with  his 
name.  He  was  known  to  control  two  or 
three  judges  and  to  have  reliable  friends  at 
court  in  New  York  and  New  Jersey.  In  the 
informal  partnership  between  the  two  men, 
Fisk  was  always  the  one  who  did  the  fighting 
out  in  the  public  view,  while  Gould  stood 


54          J.  PIERPONT  MORGAN 

back  and  pulled  wires.  The  former  had  a 
genius  for  publicity  and  self-advertisement ; 
with  his  stout  figure  and  florid  complexion, 
his  elaborate  costumes  and  enormous  dia 
monds  ;  coachmen  in  glittering  livery,  showy 
drags,  and  gay  women,  he  was  the  greatest 
newspaper  character  of  his  day.  As  boss  of 
the  Pall  River  Line  of  steamboats  he  felt 
entitled  to  wear  an  Admiral's  uniform,  and 
after  he  had  set  up  the  Erie  offices  in  the 
Grand  Opera  House,  strange  and  bizarre 
events  took  place;  ballet  girls  and  cham 
pagne  were  mixed  up  with  railroad  busi 
ness  in  a  wild  conglomeration  in  which  the 
Erie's  money  was  poured  out  in  a  golden 
flood.  Pisk  was  murdered,  finally,  by  a  man 
with  whom  he  had  had  a  quarrel  over  the 
funds  of  a  sugar  refinery. 

The  Albany  &  Susquehanna  Railroad 
would  have  been  a  valuable  prize  for  the 
Erie.  It  runs  from  the  eastern  extremity 
of  the  New  York  Central  at  Albany,  to  a 
junction  with  the  Erie  at  Binghamton.  At 
that  time  the  Erie  aspired  to  compete  with 
the  Central  for  New  England  business  and 
had  determined  to  monopolise  the  coal  trade 
between  that  section  and  Pennsylvania;  it 


THE  EAILEOAD  WEECKERS     55 

only  wanted  the  connecting  link  of  142  miles 
to  make  its  position  solid.  Jay  Gould  se 
cured  a  block  of  shares  in  the  A.  &  S.,  and 
then  began  his  characteristic  strategy.  He 
caused  the  road  to  be  thrown  into  bank 
ruptcy  and  had  Fisk  named  as  receiver. 
President  Ramsey  and  the  directors  of  the 
A.  &  S.  saw  what  was  going  to  happen  to 
them  and  their  road — they  were  about  to 
be  swallowed  up. 

Very  much  frightened,  Mr.  Ramsey  went 
to  Samuel  Sloan,  who  was  the  first  president 
of  the  Hudson  River  Railroad,  some  ten 
years  before  Commodore  Vanderbilt  bought 
it — and  begged  to  know  what  he  should 
do. 

"Why  don't  you  see  J.  P.  Morgan?" 
Sloan  said.  "Call  him  into  consultation. 
He  is  not  afraid  of  Jay  Gould,  and  he  can 
fight  him  without  ever  delivering  a  foul 
blow.  If  your  road  is  to  be  saved  to  you, 
Morgan,  I  am  sure,  is  the  man  who  can 
do  it." 

Acting  upon  this  advice  Mr.  Ramsey  and 
the  directors  visited  Mr.  Morgan.  He  was 
then  only  thirty-three  years  of  age.  But 
they  were  impressed  immediately  by  the  al- 


56          J.  PIERPONT  MORGAN 

most  intuitive  accuracy  of  his  judgment. 
He  said  to  them : 

"I  want  a  statement  of  your  exact  con 
dition.  I  want  a  brief  report  which  will 
tell  me  all  that  Gould  and  Fisk  have  done. 
I  will  examine  these  reports.  Then  I 
will  let  you  know  what  I  think  about  the 
matter." 

[Within  two  or  three  days  Mr.  Morgan 
brought  the  directors  together  again.  He 
said  to  them: 

"In  my  opinion  this  matter  will  have 
to  be  fought  out  in  the  courts.  I  feel 
certain  that  it  can  be  successfully  fought 
there.  Shall  I  go  ahead?'' 

Mr.  Morgan  was  told  to  go  ahead,  as 
tersely  as  he  had  asked  whether  he  should 
or  ngt.  He  then  retained  as  counsel  his  fa 
ther-in-law,  Charles  B.  Tracy,  and  Samuel 
Hand  of  Albany.  They  were  sure  of  get 
ting  justice  at  the  hands  of  Judge  Rufus 
"W.  Peckham  of  the  Supreme  Court,  who  was 
sitting  at  Albany.  Fisk  and  Gould  were 
represented  by  David  Dudley  Field,  and 
whenever  they  wanted  anything,  from  an 
injunction  to  a  receivership,  they  went  to 
Judge  Barnard,  sitting  in  New  York. 


THE  RAILROAD  WRECKERS     57 

A  stockholders'  meeting  of  the  railroad 
was  called  to  meet  in  Albany  on  a  certain 
day.  Two  or  three  days  before  the  date 
named,  Mr.  Morgan,  with  his  lawyers, 
Tracy  and  Hand,  worked  unremittingly  in 
the  preparation  of  papers  which  must  be 
presented  to  the  Court  in  order  to  have  a 
fair  count  made  of  the  votes  cast  at  the 
stockholders'  election.  They  expected  that 
Fisk  and  Gould  would  make  some  counter 
legal  move. 

The  night  before  the  election,  Mr.  Hand 
left  Mr.  Morgan  at  work  in  his  room 
in  the  Delavan  House  making  copies  of 
the  affidavits  which  were  to  be  used  on  the 
application  to  be  made  by  Mr.  Hand  be 
fore  Judge  Peckham  the  next  morning. 
Mr.  Hand  excused  himself  for  a  few  min 
utes  to  go  down  to  the  boat  which  was 
leaving  for  New  York,  in  order  to  see 
a  friend  off.  Hours  passed  and  he  did  not 
return  and  Mr.  Morgan  began  to  fear 
foul  play;  but,  in  the  early  morning,  Mr. 
Hand  rushed  in  and  told  how  he  had  gone 
on  board  the  boat  and  had  been  accidentally 
carried  off.  He  had  begged  the  captain  to 
put  him  ashore  but  could  not  prevail  upon 


58          J.  PIEKPONT  MORGAN 

him  to  do  so.  Finally  he  got  the  captain  to 
sell  him  one  of  the  life  boats.  When  it  was 
paid  for,  the  engines  were  slowed  down,  the 
boat  was  put  over  the  side  and  he  dropped 
into  it  and  rowed  to  the  shore.  He  saw  the 
lights  of  a  station  some  way  off  and  after 
stumbling  over  the  railroad  tracks  arrived 
at  the  village  of  Hudson  just  in  time  to 
climb  on  board  a  train  that  was  leaving  for 
Albany.  He  got  on  the  platform  of  a 
car  and  was  about  to  enter  it  when  he 
saw  Jim  Fisk  inside  with  a  carload  of 
Bowery  toughs.  As  he  was  known  by  sight 
to  Fisk,  he  realised  what  would  happen  to 
him  if  he  went  inside  the  car  and  he  rode 
all  the  way  to  Albany  on  the  platform. 

With  this  advance  knowledge  that  Fisk 
would  try  to  capture  the  stockholders' 
meeting  the  next  day  and  create  a  rough- 
house,  Mr.  Morgan  not  only  perfected 
the  legal  steps  necessary  for  a  fair  election 
but  also  made  preparations  to  receive  the 
delegation  from  the  East  Side  in  an  appro 
priate  manner. 

When  the  hour  for  the  election  came, 
Mr.  Morgan  was  standing  at  the  head  of 
the  stairs  leading  to  the  meeting  room, 


THE  RAILROAD  WRECKERS     59 

with  President  Ramsey,  of  the  A.  &  S. 
Just  before  the  meeting  was  to  be  called 
to  order,  Jim  Fisk  went  up  the  stairs  and 
a  crowd  of  his  followers  were  just  about 
to  enter  the  door  from  the  street.  Ramsey 
reached  Fisk  first  and  threw  him  down  the 
entire  flight  of  stairs  into  the  middle  of  his 
advancing  retainers.  Fisk  told  Ramsey  af 
terwards  that  he  was  the  kind  of  man  he 
liked  to  meet ! 

When  Fisk  struck  the  pavement  at  the 
foot  of  the  stairs  the  "boys"  he  had 
brought  with  him  ran  off  without  stopping 
to  pick  him  up,  but  an  angry  policeman 
grabbed  him  by  the  collar,  jerked  him  to 
his  feet,  and  dragged  him  off  to  the  police 
station.  The  officer  merely  shoved  him 
through  the  door,  however,  and  immediately 
disappeared.  There  being  no  one  to  make 
a  complaint,  Fisk  was  soon  released.  The 
" policeman"  who  arrested  him  was  one  of 
the  company's  hands,  dressed  up  for  the  oc 
casion. 

Fisk  let  the  stockholders '  meeting  go  Mr. 
Morgan's  way.  He  wasn't  the  kind  of  man 
to  stand  on  a  mere  technicality,  and  he  de 
cided  promptly  that  if  he  couldn't  run  the 


60          J.  PIERPONT  MORGAN 

meeting  he  would  at  least  run  the  road ;  very 
soon  a  ragged  army  of  Fisk  men  went  fly 
ing  over  the  rails  of  the  Susquehanna  in  an 
Erie  locomotive  and  two  work  cars,  with  or 
ders  to  capture  every  piece  of  rolling  stock 
on  the  line.  The  Susquehanna  sent  out  its 
gang  to  meet  them  and  ripped  up  rails  with 
reckless  zeal.  The  service  went  to  pieces, 
both  sides  undertaking  to  run  trains  and 
struggling  for  the  right  of  way.  On  the  ar 
rival  of  the  afternoon  train  at  the  peaceful 
village  of  Afton,  under  Erie  management, 
"it  was  obliged  to  stop,  as  three  rails  had 
been  removed  by  Superintendent  Van  Val- 
kenburg  (Susquehanna).  The  citizens 
flagged  the  train  for  the  safety  of  those  on 
board  or  a  great  loss  of  life  would  have  en 
sued."  These  villagers  were  very  bitter 
anti-Fisk  men,  but  were  not  quite  ready  for 
bloodshed — as  yet. 

Superintendent  Van  Valkenburg  ordered 
all  trains  to  stop  where  they  were  and  an 
extra  car  was  sent  out  with  150  men,  under 
command  of  Master  Mechanic  Blackball, 
and  accompanied  by  Henry  Smith,  legal 
adviser (!).  The  train  arrived  at  Barn- 
bridge,  Chenango  County,  late  in  the  even- 


THE  RAILROAD  WRECKERS     61 

ing,  and  laid  over  for  further  orders. 
Meanwhile  the  Erie  raiders  were  advancing 
with  an  engine  and  car  with  about  twenty 
men.  They  came  leisurely  up  the  road,  dis 
possessing  the  A.  &  S.  men  and  putting  Erie 
men  in  their  places. 

Blackhall  was  in  readiness.  The  Erie 
car  came  cautiously  along  the  road,  but 
not  so  cautiously  as  to  avoid  the  trap  which 
had  been  set  for  them.  The  Erie  loco 
motive  was  suddenly  thrown  from  the 
track  by  means  of  a  new  patent  frog.  At 
the  same  time  the  Susquehanna  train,  which 
was  lying  on  a  side  track,  ran  down  be 
hind  the  raiders  and  cut  off  their  retreat. 
So  all  were  captured  and  kept  as  prisoners 
by  Mechanic  Blackhall  and  the  legal  Smith. 

But  these  were  preliminary  skirmishes 
leading  up  to  the  big  encounter. 

The  Erie  had  500  men  at  the  tunnel  a 
few  miles  from  Binghamton,  and  held  the 
station  nearby.  And  the  Albany  party  held 
the  other  end  of  the  tunnel  with  about  the 
same  number.  Just  at  dusk  on  an  August 
afternoon  the  Erie  captain  determined  to 
take  the  disputed  tunnel.  He  put  some  two 
hundred  products  of  the  Bowery  and  neigh- 


62          J.  PIERPONT  MORGAN 

bouring  streets  on  two  cars,  and,  coupling  on 
a  locomotive,  sent  the  train  through  the  tun 
nel.  The  train  passed  through  the  darkness 
in  safety,  but  as  it  turned  a  curve  at  the 
mouth  a  train  with  the  Ramsey-Morgan  men 
on  board  was  seen  approaching — on  the  same 
track.  The  Erie  whistle  shrieked  for  down 
brakes,  but  the  other  train  never  slackened 
its  speed.  The  engines  crashed  together 
gloriously,  and  the  collision  was  the  signal 
for  the  fight.  The  men  spilled  out  upon  the 
track  and  fell  upon  one  another  with  sticks 
and  stones  and  revolvers  and  matchless  pro 
fanity.  After  a  time  they  got  too  much 
mixed  in  the  darkness  to  fight  any  more  and 
both  sides  drew  back,  taking  with  them  the 
wounded  and  the  drunken,  and  encamped 
beside  the  rails. 

From  this  time  the  thinly  settled  coun 
try  through  which  the  A.  &  S.  ran  was  in 
a  state  of  war.  The  Metropolitan  dailies 
sent  their  correspondents  and  the  whole 
State  looked  on  in  wonder.  While  Fisk 
and  Ramsey  were  fighting  in  the  field, 
Gould  and  Morgan  were  shooting  at  each 
other  with  injunctions;  twenty-two  suits 
were  begun  in  connection  with  this  fight. 


THE  RAILROAD  WRECKERS     63 

Finding  that  Gould  could  best  him  in  the 
use  of  such  weapons  and  was  continually 
aided  by  the  so-called  Erie  judges  at  his 
back,  Mr.  Morgan  made  an  adroit  move 
which  threw  the  case  into  the  hands  of  Gov 
ernor  Hoffman,  of  the  State  of  New  York, 
and  drew  his  opponents  before  judges  who 
took  the  up-State  view  of  the  attempted 
seizure.  The  Governor  had  already  threat 
ened  to  run  the  road  with  the  soldiers  if  the 
two  parties  did  not  end  their  differences. 
Morgan  trapped  Gould  and  Fisk  into  send 
ing  a  written  note  to  the  Governor,  stating 
that  it  was  impossible  for  the  contending 
parties  to  agree,  that  the  railroad  could  not 
be  run  as  matters  stood,  and  requesting  the 
State  to  appoint  an  official  to  take  charge 
in  the  interest  of  public  peace.  The  Gov 
ernor  appointed  A.  Bleecker  Banks,  0f  Al 
bany,  and  close  upon  this  action  there  fol 
lowed  a  momentary  calm. 

Mr.  Morgan  held  a  stockholders'  meeting 
and  a  Board  of  Directors  was  elected. 
This  new  board  empowered  Mr.  Morgan  to 
lease  the  property.  The  meeting  took  place 
late  in  the  day,  and  he  at  once  rushed  to  New 
York  to  have  the  lease  drawn  and  to  com- 


64          J.  PIERPONT  MORGAN 

plete  the  arrangement  before  Gould  could  tie 
him  fast  with  legal  proceedings.  He  fin 
ished  the  work  that  night  and  was  back  in 
Albany  the  next  day  with  the  lease,  and  be 
fore  the  Gould-Fisk  party  could  get  in  mo 
tion  the  road  was  placed  forever  beyond 
their  reach.  The  whole  property  was  leased 
to  the  Delaware  &  Hudson  Canal  Company 
through  LeGrand  B.  Cannon,  who  was 
then  president  of  that  system. 

The  stock  of  the  Albany  &  Susque- 
hanna,  which  had  been  selling  around  18, 
jumped  up  100  points;  the  stockholders 
received  a  guaranteed  rental  of  7  per 
cent,  on  their  stock,  which  was  afterwards 
increased  to  9  per  cent. ;  and  the  employees, 
many  of  whom  would  have  lost  their  posi 
tions  under  a  receivership,  were  enabled  to 
keep  their  jobs.  Mr.  Morgan's  construct 
ive  work  in  the  railroad  field  had  begun. 

This  fight  showed  that  a  new  force  had 
come  into  the  industrial  world,  a  force 
which  made  for  sound  upbuilding  as  op 
posed  to  stock  gambling  and  the  get-rich- 
quick  idea.  The  older  generation  of  bank 
ers,  completely  outdone  by  the  piratical  op 
erations  of  the  Gould-Fisk  type  of  financier, 


THE  RAILROAD  WRECKERS     65 

had  always  held  aloof.  Even  Commodore 
Vanderbilt  found  them  too  much  for  him. 
Daniel  Drew  was  bankrupted  by  his  own 
kind.  But  Mr.  Morgan  plunged  boldly  in, 
met  them  on  their  own  ground,  and  won  a 
victory  for  his  policy.  He  gives  us,  in  this 
far-away  year,  a  glimpse  of  the  future  Mor 
gan,  who  is  called  the  " inevitable;"  Fisk 
had  declared  at  the  beginning  of  this  fight 
that  he  would  have  his  way  "if  it  cost  mil 
lions  of  money  and  an  unlimited  number  of 


men.' 


Three  years  later  Mr.  Morgan  was  ap 
proached  by  the  Drexels  of  Philadelphia,  a 
very  rich  and  prosperous  banking  family, 
and  asked  to  enter  the  New  York  branch  of 
that  house  as  a  member  of  the  firm.  The 
connection  insured  him  a  position  of  influ 
ence  and  power  beyond  anything  he  had  yet 
reached.  Consequently  the  firm  of  Dabney, 
Morgan  &  Co.  was  dissolved,  and,  in  1871, 
Drexel,  Morgan  &  Co.  began  business.  A 
plot  of  ground  was  bought  at  the  corner  of 
Broad  and  Wall  Streets,  and  a  white  mar 
ble  building  was  erected  at  a  cost  of  $1,000,- 
000 — the  same  solid  structure  which,  no 
longer  very  white,  but  turned  a  dull  grey 


66          J.  PIEEPONT  MORGAN 

brown,  and  dwarfed  by  the  surrounding 
high  buildings,  is  the  headquarters  of  the 
Morgan  enterprises  to-day. 


CHAPTER  IV 

THE  FIRST  MORGAN  SYNDICATE 

THE  year  in  which  the  firm  of  Drexel, 
Morgan  &  Company  was  formed,  1871, 
saw  the  birth  also  of  the  underwriting  syn-\ 
dicate,  the  device  which  alone  makes  possiJ 
ble  the  far-flung  and  reasonably  certain  op-| 
erations  of  modern  business.  Jay  Cooke, 
the  Philadelphia  banker,  thought  of  it  first, 
but  he  gained  the  idea  from  watching  the 
evolution  of  the  French  syndicats.  The 
first  American  syndicate  was  formed  by 
Cooke  to  sell  a  part  of  an  issue  of  five  hun 
dred  millions  of  Government  bonds.  Mr. 
Morgan  was  not  a  party  in  this  enterprise, 
but  his  actions  and  those  of  his  associates 
left  no  doubt  in  Cooke 's  mind  that  he  would 
have  to  let  Mr.  Morgan  in  upon  the  next  oc 
casion  of  the  kind. 

The  public  was  suspicious  and  doubtful 
in  regard  to  the  new  financial  instrument. 
It  was  hotly  and  eloquently  urged  by  some 

67 


68          J.  PIEKPONT  MORGAN 

that  the  Government  should  sell  its  own 
bonds  over  the  counter  and  pay  its  commis 
sion  to  the  public  instead  of  to  a  combina 
tion  of  powerful  bankers;  the  descendants 
of  that  anti-syndicate  faction  are  demand 
ing  the  same  thing  to-day.  Meanwhile, 
underwriting  syndicates — which  a  political 
orator  of  the  seventies  compared  to  a  devil 
fish  and  described  as  a  stony-hearted  relic 
of  inhumanity — have  prospered  and  multi 
plied  and  taken  over  to  themselves  the 
launching  of  all  great  business  undertak- 
I  ings.  Mr.  Morgan's  career  as  a  world  finan- 
I  cier  began  in  a  syndicate  operation,  and  is 
I  now  culminating  in  a  mighty  domination  of 
the  whole  field. 

The   term   underwriter   implies   the   as 
sumption  of  risk,  of  many  risks,  in  point  of 
fact,  for,  as  used  in  finance  it  signifies  the 
guaranteeing  of  a  market  for  securities  at 
a  fixed  price.     There  is  always  a  contract 
.  under  which  the  banker  is  bound  to  take  an 
issue  of  securities  at  a  specified  time  and 
\  price.     If  he  can  sell  them  to  the  public  for 
1  more  than  he  paid  for  them  the  profit  is  his ; 
\  if  they  must  be  kept  for  a  time,  or  disposed 
of  at  a  loss,  the  loss  is  his.    In  case  only  a 


FIRST  MORGAN  SYNDICATE     69 

few  millions  are  involved,  a  single  bank  may 
finance  the  whole  affair,  but  when  a  very 
large   piece   of   business   is   offered — more 
than  it  is  safe  for  an  individual  to  handle— 
a  syndicate  will  be  formed  to  divide  the  risk. 

Participation  in  a  syndicate  is  a  privilege 
granted  only  to  the  firms  whose  influence 
will  really  widen  the  market  and  assist  in 
assuring  the  success  of  the  venture.  The 
house  which  goes  into  an  underwriting 
scheme  prepares  a  contract  in  which  every 
detail  is  arranged  and  specified,  and  this 
agreement  is  sent  to  each  of  the  participants 
for  acceptance  and  signature.  There  are 
seldom  any  refusals  if  a  strong  house  has 
made  the  proposal,  for  to  decline  in  allot 
ment  would  result  in  self-elimination  from 
the  list  for  all  future  time. 

When  Morgan  is  forming  one  of  his  giant 
combinations  he  puts  his  business  friends 
down  for  the  amounts  which  he  thinks  they 
should  have — of  the  responsibility  and  of 
the  profits.  He  doesn't  ask  them  first.  It 
has  happened,  notably  in  the  case  of  the 
Atlantic  Shipping  Trust,  that  Mr.  Morgan's 
associates  had  losses  to  make  good  instead 
of  profits  to  fold  comfortably  away.  No 


70          J.  PIEEPONT  MORGAN 

matter.  They  go  on  leaving  it  all  to  him. 
It  would  not  be  a  safe  proceeding  to  pop 
up  with  an  objection  to  any  arrangement  he 
has  made.  Once  a  capitalist  went  to  Mr. 
Morgan  on  such  an  errand.  He  had  found 
his  name  included  in  the  syndicate  backing 
a  new  scheme,  and  he  ventured  to  suggest- 
quite  casually — that  the  participation  was 
not,  in  the  present  instance,  altogether  to  his 
mind.  Mr.  Morgan  was  silent  for  a  consid 
erable  space  of  time.  It  was  so  long  before 
he  said  anything  that  the  other  began  to 
talk  about  something  else.  But  he  found 
that  Mr.  Morgan  was  not  listening — he  was 
thinking — here  was  a  man  who  had  made 
fortunes  out  of  the  operations  which  he,  J. 
P.  Morgan,  had  originated.  Lucky  to  have 
been  let  in ;  lucky,  indeed,  where  there  were 
others  who  almost  pleaded  for  the  privilege. 
Now  he  proposed  to  get  up  on  his  high  horse 
and  choose!  .  .  .  Why,  this  was  the 
very  deepest  reflection  upon  the  credit  of 
the  undertaking — the  man  was  a  contemp 
tible  bear  at  heart ! 

"You  can  stay  out,"  said  Mr.  Morgan  at 
last,  stonily,  "but  do  not  think  that  you  will 
share  with  us  again." 


FIRST  MORGAN  SYNDICATE     71 

When  the  paper  is  sent  around  for  some 
charity,  perhaps  a  church  benefaction,  Mr. 
Morgan,  from  force  of  habit,  writes  down 
the  names  of  his  friends,  with  the  amounts 
opposite,  which  they  are  destined  to  con 
tribute  ! 

The  habit  of  running  things  grew  on  himi 
quite  naturally;  he  became  used  to  taking' 
his  friends  in  charge,  as  if  they  were  not 
quite  of  age — which  recalls  something  which 
happened  to  the  late  Bishop  Potter. 

Bishop  Potter  was  spending  a  Sunday 
afternoon  with  Mr.  Morgan  at  the  latter 's 
country  place  at  Highland  Falls.  The  vil 
lage  of  Highland  Falls  is  a  way  station  on 
the  West  Shore  Road,  a  few  miles  below 
West  Point,  and  the  fast  trains  pass  it  by 
without  a  stop  on  their  first  long  jump  away 
from  New  York.  This  is  not  a  matter  of 
much  concern  to  the  financier,  who  goes 
back  and  forth  on  his  yacht;  but  on  this 
occasion  it  troubled  the  Bishop.  He  was 
loath  to  travel  on  Sunday,  but  had  an  im 
portant  engagement  to  keep  in  the  city  that 
night,  and  he  remarked  that  he  would  have 
to  take  a  local  train,  which  left  a  little  while 
before  supper. 


72          J.  PIERPONT  MORGAN 

"Oh,  no,7'  said  the  financier,  "there's  a 
train  after  that  one.  Of  course,  you'll  stay 
to  supper." 

"I  don't  see  any  train,"  objected  the 
Bishop,  "and  I  really  must  get  to  town  in 
time  to  conduct  an  evening  service." 

"There's  an  express,"  replied  his  host, 
disposing  of  the  matter — "I'll  have  it 
stopped  for  you." 

An  hour  or  so  later,  in  the  thick  darkness 
of  an  autumn  evening,  Mr.  Morgan  took  the 
Bishop  in  his  carriage  down  the  steep  road 
to  the  railroad  station.  No  lights  shone 
from  the  building.  The  coachman  got  out 
and  tried  the  door  and  rattled  it.  Then  he 
came  back  and  reported  that  the  agent  had 
gone  home  for  the  night. 

The  sound  of  an  approaching  train  was 
heard,  faintly,  but  growing  louder. 

"Break  in  the  door,"  ordered  Mr.  Mor 
gan,  impatiently — "get  a  big  stone  and 
smash  it!"  He  and  his  visitor  got  out  of 
the  carriage  and  looked  on ;  finally  the  door 
gave  way.  Mr.  Morgan  went  inside,  and 
after  scratching  a  number  of  matches,  found 
a  lantern  and  lit  it.  "All  right,  Bishop!" 
he  called  cheerfully,  "come  ahead,"  and  he 


FIRST  MOEGAN  SYNDICATE     73 

walked  out  to  the  middle  of  the  track  and 
waved  the  light. 

With  a  horrid  screeching  and  squeaking 
the  train  stopped.  It  was  a  freight ;  a  very 
long  freight.  Out  of  the  cab  leaned  the  sur 
prised  engineer,  and  from  the  caboose  some 
where  in  the  far-away  darkness  the  con 
ductor  came  running  up,  very  angry. 

"What  do  you  mean  by  stopping  this 
train?"  he  demanded  fiercely. 

Mr.  Morgan,  still  holding  the  lantern,  told 
him  who  he  was. 

"I  don't  care  a  whoop-in-blazes  who  you 
are  (the  conductor's  language  here  becomes 
unprintable),  you've  got  no  business — why," 
he  choked,  " there's  an  express  train  fol- 
lowin'  us — you'll  have  a  collision — !"— but 
Mr.  Morgan  paid  no  more  attention  to  him 
or  his  remarks. 

"All  right,  Bishop,"  he  was  saying  gen 
tly?  "you  get  right  in  the  caboose  and  ride 
to  New  York." 

Which  the  Bishop  did. 

Jay  Cooke,  the  great  Philadelphia  banker, 
held  much  the  same  position  in  the  eyes  of 
his  countrymen  a  generation  ago  that  Pier- 
pont  Morgan  holds  to-day ;  he  was  the  same 


74          J.  PIERPONT  MOKGAN 

sort  of  final  authority  in  matters  financial 


and  had  proved  the  mainstay  of  the  Govern 
ment  during  the  whole  of  the  Civil  War. 
Cooke  himself  had  a  remarkable  genius  for 
advertising;  he  could  Barnumise  a  bond  is 
sue  and  sell  securities  in  a  desert;  and  he 
began  to  take  it  for  granted,  after  years  of 
uninterrupted  success,  that  he  had  a  mono 
poly  and  would  never  have  a  rival  on  the 
American  continent.  A  few  years  after  the 
War,  Congress  passed  an  act  authorising 
the  refunding  of  five  hundred  millions  that 
had  been  borrowed  to  pay  the  cost  of  the 
struggle ;  the  proposal  was  to  save  the  pay 
ment  of  interest  by  exchanging  the  6  per 
cent,  bonds  for  fives.  In  '71  Jay  Cooke 
managed  to  place  a  portion  of  this  new  issue, 
the  public  entering  into  the  scheme  with  a 
good  deal  of  reluctance;  most  of  the  new 
bonds  were  placed  abroad.  Two  years  later 
Secretary  of  the  Treasury  George  S.  Bout- 
well  announced  another  bond  sale  and  called 
upon  the  bankers  for  proposals. 

Now  the  fat  was  in  the  fire.  From  the 
press  there  came  a  stiff  and  angry  opposi 
tion  ;  Jay  Cooke 's  rivals  went  down  to  Wash 
ington  and  carped  at  the  syndicate  idea,  his 


FIRST  MORGAN  SYNDICATE     75 

enemies  getting  the  ear  of  President  Grant ; 
and,  furthermore,  the  firms  of  Morton,  Bliss 
&  Co.,  and  Drexel,  Morgan  &  Co.,  through 
Morton  and  young  Morgan,  organised  a  new 
syndicate  to  take  the  bonding  business  away 
from  Cooke.  The  Ways  and  Means  Com 
mittee  held  public  hearings  and  became  a 
political  storm  centre. 

Mr.  Morgan's  old  employer,  William 
Butler  Duncan,  told  the  committee  that 
while  he  had  taken  no  part  in  the  syndicate 
of  '71,  he  felt  that  "it  was  a  very  doubtful 
operation  as  to  its  success,  that  there  were 
periods  during  the  pendency  of  the  syndi 
cate  when  it  was  exceedingly  doubtful 
whether  it  could  be  carried  to  a  successful 
termination.  I  doubt  very  much  whether 
in  the  present  condition  of  the  markets  of 
the  world  another  effort  in  the  same  direc 
tion  would  be  as  nearly  successful  as  that 
one  has  been."  Mr.  Duncan  advocated  call 
ing  upon  the  public  for  subscriptions. 

Levi  P.  Morton,  who  was  spokesman  for 
the  new  syndicate,  w^as  heard  before  the 
committee  on  the  day  following,  and  replied 
flatly  to  Duncan:  "Some  gentlemen  have 
argued  that  the  Government  should  wait  for 


76          J.  PIEKPONT  MORGAN 

buyers  to  come  to  the  Treasury  Department 
for  the  conversion  of  their  bonds;  in  my 
opinion  the  Government  would  have  to  wait 
for  a  long  time  before  it  would  make  any 
conversion  of  6  per  cent,  bonds  into  5  per 
cent,  bonds." 

Morton  said  he  proposed  to  become  a 
member  of  the  next  syndicate;  this  calm 
insistence  of  the  Morgan  crowd  was  in 
furiating  to  Jay  Cooke.  The  Morgan  party 
included,  besides  Morton's  American  and 
London  firms,  Mr.  Morgan's  New  York  and 
London  firms  and  the  Barings,  and  pro 
posed  to  take  either  a  hundred  millions  or  all 
of  the  remaining  three  hundred  millions  of 
the  5  per  cent,  bonds.  Cooke 's  friends  went 
directly  to  Boutwell  and  told  him  that  it 
would  be  an  unpardonable  outrage  and  a 
grievous  blunder  to  do  this  work  through 
any  other  party,  and  his  friend  Senator  Cat- 
tell,  of  New  Jersey,  wrote  to  him  from 
Washington  that  the  Morton-Morgan  pro 
posal  was  a  thing  "that  can't  be  done  and 
shall  not  be  done." 

A  smile  went  around  at  the  position  Cooke 
found  himself  in,  and  at  the  ridiculous  pro 
crastination  and  timeless  debates  in  the 


FIRST  MORGAN  SYNDICATE     77 

Ways  and  Means  Committee  room.  "Pray, 
what  is  a  syndicate?"  was  asked  in  news 
paper  doggerel: 

''Pray,  what  is  a  syndicate 
Intended  to  indicate? 

Is  queried  abroad  and  at  home. 
Say,  is  it  a  corner, 
Where  Jay  Cooke  as  Homer 

Can  pull  out  a  very  big  plum?" 

Boutwell  told  the  Ways  and  Means  Com 
mittee  that  unless  they  adopted  some  resolu 
tion  pro  or  con  he  would  take  their  failure 
as  an  indorsement  of  his  course  in  placing 
the  first  instalment  of  the  loan.  The  com 
mittee  then  adopted  a  resolution  that  it 
would  not  adopt  a  resolution!  Boutwell 
felt  that  his  course  was  reasonably  clear, 
and  he  divided  the  loan  equally  between  the 
Jay  Cooke  syndicate,  composed  of  Cooke 
and  the  Rothschilds,  and  the  Morgan  syndi 
cate  of  banking  interests. 

The  refunding  bonds  were  successfully 
sold,  although  not  without  difficulty,  the 
only  advantage  which  they  offered  to  buy 
ers  to  compensate  for  the  lessened  income 
being  greater  permanency  than  the  sixes, 
which  could  be  called  in  at  any  time. 


78          J.  PIEEPONT  MORGAN 

These  were  years  of  revulsions  and  panics 
in  the  business  world,  overtrading  and  spec 
ulation  were  rife,  and  the  paper  currency, 
already  too  large,  gave  speculators  and  cap 
italists  the  power  to  combine  together  and, 
by  a  forced  locking  up  of  paper,  to  create  a 
squeeze.  Three  hundred  and  fifty  millions 
of  United  States  notes  had  been  issued 
simply  as  a  war  measure,  and  the  true  inter 
ests  of  commerce  demanded  (the  war  neces 
sities  having  ceased)  that  these  millions  be 
slowly  and  surely  reduced  to  specie  value. 
Gold  was  then  at  10  to  15  per  cent,  premium. 
The  great  agitation  was  for  the  resumption 
of  specie  payments,  which  the  business 
world  felt  had  to  come  before  the  country 
could  do  business  on  the  scale  of  its  real 
needs. 

Mr.  Morgan  went  to  Europe  about  the 
time  of  the  Presidential  election  of  1876, 
and  he  was  impatient  with  the  men  of 
finance  he  then  met  in  London,  because  they 
were  expressing  some  doubt  about  financial 
conditions  in  the  United  States.  They  told 
him  that  the  agitation  in  Congress  and  in 
many  parts  of  the  country  for  a  very  large 
use  of  silver  in  our  currency  system  was 


FIEST  MORGAN  SYNDICATE    79 

leading  many  Americans  to  turn  a  portion 
of  their  possessions  into  money  with  which 
they  were  buying  foreign  exchange. 

"What  of  it?"  said  Mr.  Morgan. 

"Why,  they  are  using  this  exchange  to 
buy  our  Consols,  and  that  shows  that  they 
are  afraid  that  there  will  be  serious  conse 
quences  to  your  currency  on  account  of  this 
silver  legislation." 

"But  the  credit  of  the  United  States 
should  be  higher  to-day  than  it  ever  has 
been.  Within  a  few  years  we  are  going  to 
resume  specie  payments, ' '  insisted  Mr.  Mor 
gan. 

In  this  way  and  in  constant  intercourse 
with  the  great  capitalists  and  financiers  of 
Great  Britain,  Mr.  Morgan  did  something  to 
overcome  the  lack  of  confidence  in  National 
credit  which  had  for  some  time  prevailed. 
That  he  was  able  to  do  this  is  evidence  of  the 
esteem  in  which  he  was  held  and  the  faith 
that  was  put  in  his  statements. 

Yet  the  indications  were  strong  that  in 
the  United  States,  at  least,  the  credit  of  the 
Government  was  greatly  impaired.  An 
other  large  issue  of  bonds,  this  time  bearing 
4  per  cent,  interest,  was  less  favourably  re- 


80          J.  PIERPONT  MORGAN 

ceived  by  the  American  people  than  any 
issue  since  the  early  days  of  the  War.  The 
only  market  for  these  bonds  that  could  be 
obtained  was  brought  about  through  selling 
them  below  par. 

The  Government  turned  to  Mr.  Morgan 
at  this  juncture.  He  and  August  Belmont, 
together  with  the  Rothschilds,  made  prep 
arations  in  the  early  part  of  1878,  one  year 
before  the  resumption  of  specie  payments, 
to  float  the  major  portion  of  the  new  Ameri 
can  loan. 

Mr.  Morgan,  in  every  way  possible,  had 
brought  to  the  attention  of  English  capital 
the  strength  of  our  Government,  and  had 
persuaded  that  capital  that  our  bonds  would 
be  protected  absolutely  by  the  Government, 
and  that  every  condition  nominated  in  the 
bonds  would  be  fulfilled.  This  was  a  kind 
of  missionary  work,  for  which  Mr.  Morgan 
was  probably  the  best  qualified  of  American 
bankers.  He  overcame  the  doubts  that  lin 
gered  in  some  quarters  of  England  respect 
ing  the  intention  or  ability  of  the  American 
Government  to  resume  specie  payments  on 
January  1,  1879,  and  showed  how  the  step 
was  prepared  for. 


FIRST  MORGAN  SYNDICATE     81 

" There  won't  be  any  necessity  to  resume 
formally,"  he  said,  " because  resumption 
will  be  actually  in  progress  almost  sponta 
neously  six  months  before  the  date  fixed  by 
law." 

By  missionary  work  of  this  kind,  confi 
dence,  and  a  resulting  market  for  these 
bonds,  was  secured.  Within  three  months 
Mr.  Morgan  and  the  Rothschilds,  through 
Mr.  Belmont,  had  purchased  and  marketed 
fifty  millions,  and  within  six  months  one 
hundred  and  fifty  millions  more.  They 
passed  these  bonds  on  to  customers  and  in 
vestors  in  England  and  in  the  United  States, 
and  the  market  price  for  them  appreciated 
so  rapidly  that  the  syndicate  is  understood 
to  have  sold  the  bonds  at  an  advance  over 
their  purchase  price  from  1  per  cent,  early 
in  the  transactions  to  4  per  cent,  at  the 
end. 

This  negotiation  brought  Mr.  Morgan's 
banking  house  into  world- wide  reputation. 
It  was  said  by  one  cynic  at  the  time  that,  of 
course,  with  the  Rothschilds  back  of  him, 
Mr.  Morgan  was  in  a  position  to  finance  this 
great  transaction.  The  answer  to  that 
might  have  been,  "How  did  he  get  the  Roths- 


82          J.  PIERPONT  MORGAN 

childs  back  of  him'?"  But  it  was  not  true 
that  the  Rothschilds  were  back  of  him,  for 
the  syndicate  membership  stood  upon  an 
equality. 


CHAPTER  V 

THE  RESCUE  OF   VANDERBILT 

THIS  syndicate  transaction  has  always 
been  regarded  as  one  of  the  greatest 
achievements  in  the  way  of  financing  a  Na 
tional  loan.  But  an  enterprise  in  which 
Mr.  Morgan  was  exclusively  engaged  soon 
after  attracted  keener  attention  to  him  as  an 
individual,  for  the  reason  that  it  represented 
an  entirely  new  and  original  venture  for  an 
American  financier. 

William  H.  Vanderbilt  had  succeeded  his 
father  in  the  absolute  control  of  the  New 
York  Central  Railway  Corporation  in  1876. 
It  was  known  that  Mr.  Vanderbilt 's  au 
thority  over  the  New  York  Central  was 
based  upon  the  fact  that  he  was  the  owner 
of  the  greater  part  of  the  stock.  There  be 
gan  to  be  heard  criticisms  of  this  one-man 
power  in  a  great  railway  system.  It  is  now 
possible  to  explain  for  the  first  time  in  print 
what  the  reasons  were  which  impelled  Mr. 

83 


84          J.  PIERPONT  MORGAN 

Vanderbilt  to  take  a  step  which  is  one  of  the 
landmarks  in  the  history  of  American  fi 
nancing. 

The  Legislature  at  Albany  began  to  im 
pose  heavy  taxation,  not  so  much  upon  Mr. 
Vanderbilt  himself  as  upon  the  New  York 
Central  property.  The  reason  given  for 
this  was  the  fact  that  the  property  was  in 
practically  the  exclusive  ownership  of  one 
man.  There  were  intimations  that  taxation 
of  this  kind  would  be  increased  from  time 
to  time,  and  Vanderbilt  became  very 
much  frightened.  He  consulted  with  some 
friends  in  whose  judgment  he  had  confi 
dence.  He  informed  them  that  if  he  could 
discover  a  way  by  which  he  could  scatter  a 
considerable  part  of  his  holdings  of  New 
York  Central  stock  he  would  certainly  act 
upon  it. 

"But  I  cannot  offer  the  stock  in  open 
market,''  Vanderbilt  said.  "To  do  that 
would  cause  great  depreciation  in  the 
market  value  of  the  stock.  It  might,  in 
fact,  precipitate  general  demoralisation  and 
bring  about  a  panic." 

Mr.  Morgan's  name  was  suggested  to  Mr. 
Vanderbilt  in  connection  with  this  matter. 


THE  RESCUE  OF  VANDERBILT     85 

Mr.  Vanderbilt  merely  knew  of  Mr.  Mor 
gan,  through  Morgan's  association  with  the 
Drexels,  who  were  in  a  sense  the  fiscal 
agents  of  the  Pennsylvania  Railroad  Com 
pany.  That,  however,  would  not  of  itself 
explain  the  determination  of  Mr.  Vander 
bilt  to  summon  Morgan  and  place  the  diffi 
cult  proposition  before  him.  The  fact  was 
that  he  had  been  greatly  impressed  by  Mor 
gan's  marketing  of  Government  bonds  in 
England,  and  shortly  after  this  the  two  men 
met  at  Vanderbilt 's  invitation.  The  owner 
of  the  New  York  Central  said : 

"Mr.  Morgan,  the  New  York  Central  is 
in  grave  danger,  through  the  disposition  of 
the  Legislature  and  to  some  extent  of  the 
City  of  New  York,  to  impose  excessive  taxa 
tions  upon  it.  Unless  this  disposition  is 
checked  the  consequences  will  be  serious, 
and  force  the  road  to  go  into  bankruptcy. 
Something  must  be  done,  and  quickly.  The 
property  is  attacked  in  this  way  chiefly  be 
cause  I  am  regarded  as  almost  the  exclusive 
owner  of  it.  I  do  not  see  any  way  of  put 
ting  an  end  to  this  danger,  except  by  market 
ing  a  very  large  part  of  my  stock  holdings. 
I  want  you  to  tell  me  how  it  can  be  done." 


86          J.  PIERPONT  MORGAN 

In  reply  Mr.  Morgan  spoke  confidently  of 
the  New  York  Central  property,  expressing 
the  opinion  that  it  was  capable  of  greater 
expansion  and  largely  increased  earning 
capacity.  He  was  certain  that  his  friends 
in  England  had  a  high  opinion  of  the  prop 
erty,  and  in  his  view  any  amount  of  the 
Vanderbilt  stock  which  Mr.  Vanderbilt  was 
willing  to  part  with  could  be  privately  and 
without  the  knowledge  of  the  public  passed 
over  to  English  investors.  "How  much 
stock,"  he  asked,  "are  you  ready  to 
sell?" 

Vanderbilt  said  that  he  owned  87  per 
cent,  of  the  entire  capital  stock  of  the  Cen 
tral,  and  that  he  was  willing  to  part  with 
so  much  of  it  that  it  could  not  be  said  that 
he  was  the  owner  of  a  majority  of  the  stock. 

Morgan  gave  his  answer  almost  upon  the 
instant.  He  was  certain,  he  said,  that  he 
could  dispose  in  England  and  in  private,  not 
using  customary  stock  market  methods,  of 
all  the  stock  that  Mr.  Vanderbilt  wanted  to 
dispose  of.  Furthermore,  he  was  confident 
that  he  could  pass  this  stock  over  to  invest 
ors  at  practically  the  market  price,  which 
was  then  about  130.  x 


THE  RESCUE  OF  VANDERBILT     87 

The  agreement  was  made  in  the  course 
of  a  few  days,  although,  of  course,  it  took 
some  time  to  arrange  for  some  of  the  de 
tails.  Aside  from  Mr.  Vanderbilt  and  Mr. 
Morgan  and  perhaps  one  other  person,  no 
one  had  the  slightest  suspicion  or  hint  that 
a  transaction  of  this  kind  was  under  way. 
Nor  is  it  to  this  day  known,  excepting  to  the 
parties  themselves,  who  among  the  great  in 
vestors  in  England  bought  the  stock. 

Not  until  the  stock  had  passed  from  Mr. 
Vanderbilt 's  ownership  to  that  of  the  Eng 
lish  investors  was  it  known  that  Mr.  Van 
derbilt  had  sold  a  block  of  New  York  Cen 
tral  stock  of  twenty-five  millions  par  value 
through  Mr.  Morgan  to  English  investors. 
That  fact  was  purposely  made  public.  The 
purpose  that  lay  behind  was  achieved.  At 
tempts  to  tax  excessively  the  New  York 
Central  ceased,  but  Mr.  Vanderbilt 's  mo 
tives  were  misconstrued.  The  common  im 
pression  was  that,  being  fearful  of  the  fu 
ture  of  the  New  York  Central,  he  deter 
mined  to  convert  a  large  part  of  this  portion 
of  his  holdings  in  the  stock  into  Government 
bonds.  Another  motive  widely  attributed 
to  him  was  a  desire  somewhat  to  scatter  his 


88          J.  PIERPONT  MORGAN 

holdings  so  that  he  would  escape  the  charge 
of  being  the  exclusive  one-man  power. 

For  his  part  Mr.  Morgan  had  achieved  an 
unprecedented  thing  in  American  finance. 
England  and  the  continent  of  Europe  had 
for  some  years  been  furnishing  capital  for 
American  railways,  but  this  was  chiefly 
done  in  the  way  of  loans  or  through  the  se 
curity  market  methods.  There  had  never 
been  a  large  outright  sale  direct  to  English 
investors  of  American  railway  securities  be 
fore.  Mr.  Morgan  then  obtained  the  right 
to  vote  the  proxies  of  the  English  holders  of 
Central  stock,  and  holds  that  privilege  to 
this  day. 

J.  P.  Morgan  was  slowly  becoming  known, 
not  widely  or  through  the  newspapers,  but 
among  various  groups  and  circles.  The 
soldiers  of  the  regular  army,  for  instance, 
knew  little  of  New  York  bankers,  and  of  Mr. 
Morgan  least  of  all,  but  in  the  year  1877 
they  became  aware  of  his  existence  all  of 
a  sudden.  In  that  year  there  was  an  insti 
tution  which  to-day  the  army  knows  not  of. 
It  was  called  the  posse  commitatus,  and  was 
in  demand  chiefly  in  the  Southern  States 
during  the  days  of  carpet-bagging.  Under 


J.   PIERPONT  MORGAN  AT  THE  ACE  OF  FORTY. 


THE  RESCUE  OF  VANDERBILT     89 

the  posse  commitatus  it  was  possible  for  the 
civil  authorities  to  call  upon  the  military  at 
any  time  or  place  to  keep  order  and  make 
arrests,  and  the  thing  was  being  put  into 
very  plentiful  use  at  the  polls  on  election 
day.  The  South  finally  became  so  much 
enraged  that  her  Congressmen  at  Washing 
ton  held  up  the  Appropriation  bill  ordinar 
ily  passed  for  the  pay  of  the  regular  army. 
For  nearly  a  year  the  soldiers  received  pay 
checks,  which  were  perfectly  useless,  as 
there  was  no  money  with  which  to  cash 
them.  This  applied,  of  course,  to  every  sol 
dier  in  the  Union,  from  the  garrison  posts 
in  the  East  to  the  fighting  bodies  on  the 
plains. 

General  Miles  was  fighting  the  Nez  Perces 
wars  out  in  the  Yellowstone;  it  was  tough 
fighting  and  hard  riding,  which  brought  the 
men  back  to  civilisation  without  seats  to 
their  trousers,  with  terrible  appetites,  and 
not  a  cent  to  buy  food  for  themselves  or 
their  horses.  There  was  only  the  Jew 
money-lender,  offering  to  accept  the  pay 
master's  checks  at  a  discount  of  25  per  cent. 
— and  wailing  about  the  risk. 

Driven  by  necessity  the  officers  and  men 


90          J.  PIERPONT  MORGAN 

were  slowly  making  up  their  minds  to  part 
with  $25  out  of  every  hundred  that  right 
fully  belonged  to  them,  when  news  came  that 
J.  P.  Morgan,  of  Drexel,  Morgan  &  Co.,  had 
provided  the  cash  to  pay  all  of  the  army 
salaries  immediately  and  at  discount  which 
would  barely  pay  the  cost  of  the  proceeding 
— namely,  1  per  cent. 

To  those  veterans  this  action  of  Mr.  Mor 
gan's  is  undoubtedly  the  greatest  thing  he 
ever  did  or  ever  will  do. 

With  one  of  the  social  and  political  or 
ganisations  which  had  grown  out  of  the  di 
vided  public  opinion  in  the  North  during 
the  War,  Mr.  Morgan  now  become  asso 
ciated.  This  was  the  Union  League  Club, 
which  had  been  organised  in  '63,  with  the 
primary  object  of  aiding  the  Government 
in  its  efforts  to  suppress  the  Rebellion;  the 
test  qualification  for  membership  was  abso 
lute  and  unqualified  loyalty  to  the  Lincoln 
administration.  Mr.  Morgan  was  elected  a 
member  of  this  club  early  in  the  seventies, 
and  the  fact  is  interesting  as  showing  what 
his  politics  were  at  bottom.  For  the  rest 
he  never  talked  politics  with  any  zest  for  the 
subject. 


THE  RESCUE  OF  VANDERBILT    91 

It  happened  some  twenty-five  years  later 
that  several  members  of  the  club  were  of  the 
opinion  that  the  institution  would  do  itself 
honour  by  electing  Mr.  Morgan  president. 
He  was  informed  that  if  he  would  allow 
himself  to  be  a  candidate  he  would  be  unani 
mously  elected. 

"No,"  said  Mr.  Morgan,  shaking  his  head 
kindly,  but  emphatically,  "No,  you  must 
find  some  other  candidate."  Had  he  been 
willing  to  accept  he  would  have  joined  a  line 
of  distinguished  men,  the  New  York  mer 
chant,  Robert  B.  Minturn;  the  diplomat, 
John  Jay;  Joseph  H.  Choate;  Hamilton 
Fish,  who  had  been  Governor,  United  States 
Senator,  and  Secretary  of  State;  William 
M.  Evarts,  Chauncey  M.  Depew,  Gen.  Hor 
ace  Porter,  and  Elihu  Root.  But  distinc 
tion  of  that  kind  did  not  appeal  to  Mr. 
Morgan. 

Yet  when  representatives  of  the  Board 
of  Trustees  of  Columbia  University  ap 
proached  him,  somewhat  diffidently,  to  ask 
if  he  would  accept  election  as  trustee  of 
the  University,  they  were  gratified  to  see 
that  Mr.  Morgan  appeared  to  feel  keenly 
appreciative  of  the  offer,  saying:  "I 


92          J.  PIERPONT  MOKGAN 

should  feel  it  an  honour."  That,  however, 
was  his  attitude  towards  many  of  the  edu 
cational  and  philanthropic  institutions  of 
the  city.  Any  honour  that  seemed  to  have 
direct  or  indirect  association  with  politics  he 
looked  upon  as  of  no  consequence.  But  to 
be  associated  in  the  direction  of  a  philan 
thropy  or  an  important  educational  institu 
tion  like  the  Museum  of  Natural  History 
or  the  Metropolitan  Museum  of  Art,  seemed 
to  be  the  only  honour  for  which  he  cared  in 
the  slightest  degree. 

For  ten  years  and  more  after  the  close  of 
the  War  the  American  railroads  suffered 
from  the  inroads  of  the  stock  jobbers.  It 
has  been  related  how  Gould  and  Fisk  tried 
to  steal  an  up-State  line  and  how  Mr.  Mor 
gan  blocked  their  movements ;  there  was  now 
growing  up  a  new  idea  in  financial  f  reeboot- 
ing  by  the  side  of  which  the  Gould-Fisk 
operations  seem  almost  petty.  This  was  the 
organisation  of  syndicates  to  build  compet 
ing  lines.  This  was  far  worse  than  stock 
jobbing.  The  evil  a  stock  jobber  does  dies 
with  him,  but  a  competing  railroad  for 
which  there  is  no  room  on  the  face  of  the 
earth,  which  is  simply  a  senseless  excres- 


THE  RESCUE  OF  VANDERBILT     93 

eence,  built  to  bleed  an  established  line,  lives 
forever,  and  is  a  permanent  evil.  Like  the 
Erie,  its  history  becomes  an  endless  series 
of  reconstructions.  The  roads  it  parallels 
may  have  been  good  solid  properties,  as  the 
New  York  Central  and  the  Lake  Shore  were 
when  attacked  by  the  unlooked-for  competi 
tion  of  the  West  Shore  and  the  Nickel  Plate. 
They  may  have  paid  regular  dividends  and 
found  a  ready  market  for  their  shares  as 
well  as  their  bonds  among  people  who  would 
never  buy  a  speculative  security.  But 
along  comes  a  wildcat  line  and  changes 
everything;  railroad  wars  break  out,  rates 
are  cut  down  within  an  inch  of  ruin,  trains 
begin  to  run  half  empty,  the  company's 
credit  weakens  fast,  a  sound  and  healthy  in 
stitution  goes  into  a  decline. 

The  excitement  and  risk  of  these  large 
and  piratical  operations  appealed  to  strenu 
ous  and  eager  business  men,  and  on  all  sides 
the  railroads,  which  had  only  begun  to  feel 
themselves  solidly  established,  were  beset  by 
unscrupulous  and  dangerous  competition. 
The  Nickel  Plate  duplicated  the  Vanderbilt 
system  from  Buffalo  to  Chicago  and  Van 
derbilt,  impulsively  and  in  great  alarm  took 


94          J.  PIERPONT  MOEGAN 

it  off  the  hands  of  the  promoting  syndicate 
before  it  was  finished. 

The  West  Shore  Railway  System  was 
planned  in  the  late  seventies  by  a  relatively 
new  group  of  men.  One  was  Commodore 
Winslow,  a  name  now  forgotten  by  the 
public.  Into  some  association  with  the  pro 
moters  came  Gen.  Horace  Porter.  These 
promoters  purposed  constructing  a  rail 
road  from  a  point  opposite  Forty-second 
Street,  New  York  City,  along  the  right  bank 
of  the  Hudson  River,  upon  the  left  bank 
of  which  ran  the  New  York  Central.  The 
Hudson  River  divided  the  two  systems  as 
far  north  as  Albany.  Then  it  was  planned 
to  continue  the  railroad  from  Albany  to 
Buffalo,  paralleling  the  Central  for  prac 
tically  the  entire  distance,  so  that  the  tracks 
of  one  system  could  be  seen  from  the  other. 

Soon  after  the  road  began  operations,  it 
began  to  cut  rates,  in  order  to  draw  away 
business  from  the  Central.  Its  rates  were 
so  low  that  it  did  cut  very  heavily  into  the 
Central's  traffic;  the  rates  were  put  down 
and  down  until  the  West  Shore  was  running 
at  such  a  loss  that  it  had  to  be  placed  in  the 
hands  of  a  receiver,  and  the  Central  was 


THE  RESCUE  OP  VANDERBILT     95 

approaching  bankruptcy.  Mr.  Vanderbilt 
and  President  Chauncey  M.  Depew  sought 
in  vain  for  a  way  out  of  their  dangerous 
situation. 

What  was  being  done  to  the  New  York 
Central  was  duplicated  in  other  quarters. 
Most  of  the  roads  were  an  amalgamation  of 
short  lines  more  or  less  loosely  put  together, 
averaging  not  more  than  forty  or  fifty  miles 
apiece.  They  were  loaded  down  with  debt 
and  menaced  by  vicious  and  deadly  compe 
tition,  which  they  returned  in  kind.  The 
railroad  situation  in  the  early  eighties  was 
getting  to  be  very  like  bedlam,  with  bank 
ruptcy  at  the  end  of  the  chapter  for  many, 
—for  the  just  as  well  as  the  unjust. 


CHAPTER  VI 

RAILROAD  CHAOS  AND  RUIN" 

EARLY  in  June  of  the  year  1885,  J.  P. 
Morgan  returned  to  New  York  from 
his  customary  trip  to  London  and  the  Con 
tinent.  In  this  simple  statement  of  fact 
there  is  nothing  to  excite  one.  Neverthe 
less,  it  is  true  that,  on  this  occasion,  Mr. 
Morgan's  arrival  upon  his  native  shore  was 
an  event  of  great  importance.  It  marked 
the  beginning  of  a  movement  to  end  compe 
tition  between  railroads,  the  giving  of  a  new 
set  of  commandments  to  big  business  enter 
prises:  Don't  fight  each  other,  don't  waste 
the  strength  of  one  another,  stand  together 
and  divide  the  profits  which  will  assuredly 
be  yours. 

The  phenomenal  year  of  1880,  during 
which  a  succession  of  good  crops  in  America 
and  bad  crops  in  Europe  had  expanded  the 
railroad  business  to  Gargantuan  propor 
tions,  saw  the  spirit  of  speculation  run  mad. 

96 


RAILROAD  CHAOS  AND  RUIN     97 

In  two  years  twenty-nine  thousand  miles  of 
new  lines  were  laid  down,  an  addition  of 
thirty-four  per  cent,  to  the  mileage  of  the 
country.  Of  these  new  railroads,  about  one- 
third  were  justified  by  the  existing  demand, 
one-third  more  would  become  useful  at  some 
time  in  the  future,  and  the  others  would 
never  be  of  any  value  to  anyone,  except,  per 
haps,  to  the  promoters,  if  they  succeeded  in 
selling  out. 

The  first  railroads  were  local  lines  radiat 
ing  from  large  cities  and  towns,  and  the 
process  of  building  up  the  leading  systems 
had  been  always  a  process  of  combining  local 
roads  into  important  and  serviceable  trunk 
lines.  Once  you  travelled  from  Albany  to 
Buffalo  over  the  Albany  &  Schenectady, 
Schenectady  &  Utica,  Utica  &  Syracuse, 
Syracuse  &  Auburn,  Auburn  &  Rochester, 
and  Rochester  &  Buffalo  railroads.  These 
fragments  of  roads  had  been  made  a  part  of 
the  New  York  Central,  which  was  originally 
a  consolidation  of  eleven  railroads.  S(imi- 
larly,  the  Pennsylvania  had  been  formed 
out  of  a  multiplicity  of  lines  southwest  of 
New  York.  Such  combinations  returned 
huge  profits,  because  the  business  of  the 


98          J.  PIEEPONT  MOEGAN 

consolidated  roads  increased  in  much  larger 
proportion  than  did  the  cost  of  financing 
and  operating  the  additional  mileage. 

The  owners  of  these  new  lines  were  in  a 
position  of  vast  strategic  advantage;  they 
were  the  only  ones  who  could  supply  a  nec 
essary  service  to  their  countrymen.  Their 
terminal  facilities,  cars  and  engines,  lines  of 
rail,  could  not  be  duplicated  except  at  an 
increased  cost ;  apparently  they  had  nothing 
to  do  but  to  lie  comfortably  in  the  centre  of 
a  stream  of  prosperity  and  receive  the  good 
things  floating  down  to  them. 

True,  they  had  sometimes  to  fight  for 
their  share.  Pooling  agreements  were  in 
vented,  for  the  purpose  of  making  such  bat 
tles  much  less  frequent  and  less  bloody. 
Things  went  along  smoothly  enough  until 
the  idea  of  building  parallel  lines  was  not 
merely  conceived,  but  put  in  action.  This 
was  a  thing  which,  by  every  rule  of  good 
business,  was  theoretically  impossible. 
From  the  viewpoint  of  economists  it  simply 
couldn't  happen;  the  axioms  forbade.  Yet 
it  came  to  pass. 

The  theory  of  competition  contains  the 
assumption,  accepted  for  a  century,  that 


RAILROAD  CHAOS  AND  RUIN     99 

when  the  returns  from  an  undertaking  fall 
below  the  cost  of  service,  competition  will 
come  to  an  end.  According  to  the  school 
books  no  railroad  could  afford  to  carry 
freight  and  passengers  for  less  than  cost, 
and  would  not  attempt  to  do  so.  And  as  the 
big  established  lines  knew  that  they  were 
in  a  position  to  provide  a  service  more  eco 
nomically  than  any  newcomer  could  furnish 
it  they  did  not  fear  competition.  But  the 
worthy  theory  failed  in  the  case  of  the  rail 
roads. 

To  make  money  out  of  the  building  of  a 
railroad  it  was  only  necessary  to  produce  a 
small  sum  to  pay  for  a  charter,  with  the 
right  to  issue  first  mortgage  bonds.  The 
original  subscribers  then  would  have  the 
disposal  of  whatever  funds  the  bondholders 
might  provide.  Out  of  this  handsome  pile 
they  could  pay  themselves  a  good  commis 
sion  for  selling  the  bonds,  or  form  a  con 
struction  company  and  contract  to  pay 
themselves  anything  in  reason  or  out  of 
reason  for  building  the  road.  The  bond 
holders'  money  flowed  into  their  pockets  as 
directors  and  as  contractors.  As  a  means  of 
becoming  rapidly  rich,  building  railroads 


100        J.  PIEKPONT  MORGAN 

was  better  than  patent  medicines,  and  made 
the  saving  philosophy  of  Ben  Franklin 
hopelessly  out  of  date. 

Often  the  money  came  out  of  the  stock 
holders  of  rival  lines,  and  the  system  of  re 
ceiverships  which  was  originally  intended  to 
furnish  protection  to  the  investors  was  used 
continually  to  further  schemes  which,  if  not 
wholly  unscrupulous,  were  at  least  nothing 
better  than  gambling  with  the  prosperity  of 
established  enterprises  by  forcing  competi 
tion  to  a  point  where  there  was  nothing  but 
bankruptcy  in  store  for  all,  the  sound  as 
well  as  the  unsound.  Insolvent  themselves, 
these  speculative  railroads  had  nothing  to 
lose  and  much  to  gain  by  dragging  their 
competitors  down  to  their  level. 

It  is  obvious  that  when  one  railroad  in  a 
territory  reduces  its  charges  all  others  in 
the  same  section  must  immediately  follow 
suit,  for  the  simple  reason  that  even  if  a 
railroad's  business  shrinks  to  almost  noth 
ing  its  regular  and  heavy  expenses  continue 
about  the  same.  It  can  better  afford  to 
carry  freight  for  half  the  cost  of  service 
than  not  to  carry  it  at  all. 

In  the  chaos  of  railroad  affairs  that  f ol- 


EAILROAD  CHAOS  AND  RUIN     101 

lowed,  the  public  was  terribly  in  the  dark 
as  to  what  was  going  on,  terribly  in  danger 
of  losing  money  on  its  investments  Jin  •  rail 
road  securities — and  terribly  pleased  at  the 
abrupt  cheapening  of  freight  rates.  '  The 
big  owners  fought  out  their  battles  without 
caring  a  pin  who  was  helped  or  hurt.  W. 
H.  Vanderbilt,  of  the  Central  and  the  Lake 
Shore,  had  followed  his  father's  policy  up 
to  this  time;  he  never  sold  his  stocks  if  he 
could  help  it,  and  was  always  ready  to  sus 
tain  his  properties  in  the  market. 

Therefore,  the  investors  who  looked  up  to 
him  were  rudely  shocked  when  he  became 
the  leader  in  a  ruinous  war  of  east-bound 
freight  rates  which  depressed  the  value  of 
all  railway  securities.  This  war  had  been 
begun  against  the  Erie,  to  take  away  some 
of  its  grain  traffic,  but  after  the  building  of 
the  Nickel  Plate,  which  paralleled  Vander 
bilt 's  Lake  Shore,  it  was  carried  on  with  a 
deeper  purpose,  that  of  throwing  the  Nickel 
Plate  into  bankruptcy.  The  contest  was 
carried  on  with  the  greatest  bitterness  and 
energy  and  a  culminating  point  was  reached 
when  Vanderbilt  angrily  left  a  meeting  of 
trunk  line  presidents,  at  which  attempts  had 


102        J.  PIEEPONT  MORGAN 

been  made  to  end  the  fight;  he  rejected  ev 
ery  pJar-  of  adjustment  advanced.  For  a 
while,  jn  the  subsequent  meetings  in  the 
Pool  Commission's  office,  the  only  repre 
sentative  present  from  the  Vanderbilt  roads 
was  a  subordinate  officer  of  the  Michigan 
Central. 

But  Vanderbilt  could  not  stand  out  like 
this  indefinitely ;  it  was  costing  everyone  too 
much,  including  himself.  Eventually  he 
bought  the  Nickel  Plate.  He  did  not  know 
that  the  road  was  on  the  verge  of  collapse ; 
if  he  had  waited  two  months,  or  even  six 
weeks,  he  might  have  obtained  it  for  a  small 
part  of  the  price  he  actually  paid.  He  never 
forgot  this  experience,  and  when  the  West 
Shore  sprang  up  as  a  rival  of  the  Central, 
Vanderbilt  held  off  and  played  a  waiting 
game. 

All  attempts  to  settle  the  difficulties  of 
the  trunk  lines  only  made  them  more  an 
tagonistic.  The  roads  themselves  seemed 
to  have  given  up  all  intention  of  reorgan 
ising  the  pool  or  trying  to  maintain  rates; 
railroad  experts  began  to  urge  the  passage 
of  legislation  to  prevent  competition  from 
becoming  ruinous.  The  New  York  Cen- 


EAILEOAD  CHAOS  AND  RUIN     103 

tral,  having  carried  its  fight  to  the  point 
where  the  receiver  of  the  West  Shore  could 
borrow  no  more  money,  was  not  disposed 
to  make  peace  until  its  rival  was  thoroughly 
crushed.  The  Lackawanna  and  the  Erie 
were  having  a  similar  conflict,  their  lines 
running  almost  in  sight  of  each  other  all 
the  way  from  Binghamton  to  Buffalo.  The 
Baltimore  &  Ohio  had  invaded  the  Penn 
sylvania's  territory  and  was  completing  its 
line  from  Baltimore  to  New  York.  Van- 
derbilt's  South  Pennsylvania  was  pushing 
out  parallels  to  the  main  line  of  the  Penn 
sylvania;  his  invasion  of  the  Pennsylvania's 
Clearfield  bituminous  region  was  perhaps 
the  bitterest  drop  in  the  cup.  All  the  roads 
had  made  low-rate  freight  contracts  run 
ning  a  long  time  ahead,  they  had  chopped 
passenger  rates,  and  so  great  was  the  demor 
alisation  that  it  did  not  seem  possible  that 
any  resolutions  or  meetings  of  presidents 
could  settle  the  difficulties. 

This  was  the  situation  when  Mr.  Morgan 
returned  from  Europe  in  June,  1885.  He 
brought  back  with  him  a  store  of  vivid  im 
pressions,  definitely  unpleasant,  even  bitter. 
American  railroads  had  a  very  bad  name  on 


104        J.  PIERPONT  MORGAN 

the  other  side;  " unscrupulous  competi 
tion,"  " loose  accounting,"  " barbarism," 
"folly,"  " infamous  speculation,"  were  the 
words  and  phrases  oftenest  associated  with 
our  railroads.  One  of  the  historic  British 
monthlies  reviled  our  industrial  leaders  un 
der  the  caption,  "  Freebooters  of  American 
Finance." 

The  situation  aroused  Mr.  Morgan.  Al 
though  he  was  not  a  railroad  man  in  any 
sense — he  had  always  been  a  banker — he 
could  sit  by  no  longer,  for  the  interests  he 
represented  and  all  his  life  had  represented 
were  being  sacrificed.  "I  made  up  my 
mind,"  he  said,  "that  something  should  be 
done." 

The  West  Shore  and  the  South  Pennsyl 
vania  were  the  two  most  pronounced  "sore 
spots" — to  use  Mr.  Morgan's  expression; 
and  as  the  settlement  of  their  difficulties  was 
a  necessary  prelude  to  any  lasting  arrange 
ment  among  the  trunk  lines,  he  took  hold 
of  those  two  cases,  directly  and  with  charac 
teristic  determination. 

The  South  Pennsylvania  was  only  a 
projected  line,  partially  completed,  but  the 
[West  Shore  had  been  in  active  operation 


RAILROAD  CHAOS  AND  RUIN     105 

for  some  time,  and  had  recently  struck  bot 
tom.  This  road  had  grown  out  of  the  con 
nection  of  a  few  individuals  with  the  New 
York,  Ontario  &  Western,  which  had  ten 
million  dollars  in  its  treasury  at  the  time. 
Charles  T.  Woerishoffer,  a  member  of  the 
New  York  Stock  Exchange  on  the  bear 
side,  Gen.  Edward  F.  Winslow,  railroad 
engineer,  and  Gen.  Horace  Porter,  its  pro 
moters,  \vere  in  absolute  control  of  three 
corporations — the  Ontario  &  Western,  the 
North  River  Construction  Company,  and 
the  West  Shore.  With  its  ten  millions  the 
Ontario  &  Western  bought  bonds  of  the 
West  Shore,  and  in  this  way  the  first  im 
portant  financing  was  made  possible.  Af 
terwards  John  Jacob  Astor,  D.  O.  Mills,  and 
several  other  prominent  capitalists  took  up 
the  bonds,  until  at  last  forty  millions  had 
been  issued.  It  was  planned  to  parallel  the 
New  York  Central  for  the  entire  distance 
from  New  York  to  Buffalo,  so  that  the 
tracks  of  one  line  could  be  seen  from  the 
other. 

It  was  argued  by  the  promoters  that 
by  adopting  the  same  route  as  the  Central 
via  the  Hudson  and  the  Mohawk  valleys,  the 


106        J.  PIEEPONT  MORGAN 

new  road  would  have  the  advantage  of  low 
grades ;  the  construction  was  to  be  first  class, 
yet  the  cost  light,  and  the  bonded  indebted 
ness  and  stock  of  the  road  was  limited  to 
seventy  millions,  so  small  a  sum  compared 
with  other  trunk  lines,  particularly  in  com 
parison  with  the  watered  millions  of  the  Cen 
tral,  that  in  making  rates  for  business  the 
new  road  would  have  the  advantage.  The 
public  swallowed  this,  and  subscribed  liber 
ally. 

Within  two  years  the  real  facts  came  out ; 
the  public  learned  that  the  contract  between 
the  West  Shore  and  the  Construction  Com 
pany  was  wholly  to  the  advantage  of  the 
latter.  The  truth  was  that  the  terms  of  this 
contract  left  the  railroad  hopelessly  bank 
rupt.  The  construction  of  373  miles  of 
double  track  and  thirteen  miles  of  single 
track  under  its  terms  called  for  nearly  sev 
enty-six  millions,  while  the  West  Shore  had 
but  forty  millions  of  bonds  and  thirty  mil 
lions  of  stock,  and  the  available  assets  were 
still  less.  As  the  work  proceeded  the  cost 
mounted  by  leaps  and  bounds,  and  the  debts 
also.  No  fewer  than  two  hundred  and  fifty 
lawsuits  were  brought  against  the  road  and 


RAILROAD  CHAOS  AND  RUIN     107 

claims  of  all  kinds  were  showered  upon 
it. 

The  management  sought  desperately  for 
some  means  of  getting  the  road  upon  its 
feet.  Rates  were  cut  so  low,  that,  although 
the  traffic  the  road  received  injured  the  Cen 
tral,  it  did  not  benefit  the  West  Shore.  In 
default  upon  its  interest,  in  an  incomplete 
condition,  never  earning  money  enough  to 
pay  its  operating  expenses,  the  road  was 
placed  in  the  hands  of  a  receiver  in  the 
spring  of  '85.  In  order  to  pay  expenses  the 
receiver  was  obliged  to  issue  certificates, 
and,  with  the  fierce  rate-cutting  keeping 
the  income  down,  new  issues  of  certifi 
cates  piled  up  until  the  road  was  being  oper 
ated  at  a  cost  of  one  hundred  and  forty- 
five  per  cent.  Of  course  this  meant  not 
merely  bankruptcy,  but  utter  annihilation. 
The  Central  was  earning  a  bare  one  per  cent, 
on  its  stock.  It  had  come  down  mightily 
and  was  travelling  straight  toward  a  condi 
tion  of  insolvency ;  its  whole  fate  hung  upon 
the  question  of  the  amount  of  money  the 
West  Shore  might  be  able  to  borrow. 

Of  course,  everyone  looked  toward  Mr. 
Vanderbilt.  He  was  expected  to  buy  the 


108        J.  PIERPONT  MOEGAN 

West  Shore,  but  Vanderbilt,  remembering 
his  experience  with  the  Nickel  Plate,  hung 
back ;  he  was  not  in  a  hurry.  Moreover,  he 
had  his  South  Pennsylvania  on  his  hands, 
and  this  road  stood  in  exactly  the  relation 
to  the  Pennsylvania  that  the  West  Shore 
did  to  the  Central. 

The  president  of  the  Pennsylvania  at  that 
time  was  George  H.  Roberts,  an  obstinate, 
tenacious  man,  who  had  started  in  the  rail 
road  business  as  a  rodman  with  a  construc 
tion  gang,  and  had  a  small  opinion  of 
financiers;  he  was  a  Welshman,  to  boot. 
Roberts  spoke  plainly  on  the  subject  of  rail 
roads  built  to  compete  with  established 
lines.  He  called  it  blackmail,  and  said  that 
the  only  way  to  put  a  stop  to  operations 
of  this  kind  was  to  fight,  fight,  until  the 
builders  were  crushed.  He  intended  to 
follow  this  policy,  and  declared  that  no  one 
could  induce  him  to  drop  it.  This  last  was 
spoken  for  the  benefit  of  Mr.  Morgan,  who 
had  begun  negotiations  for  some  sort  of  com 
promise.  Andrew  Carnegie,  who  had  be 
come  heavily  interested  in  the  South  Penn 
sylvania,  went  to  Roberts  and  suggested 
gently  that  the  new  road  could  be  better 


RAILROAD  CHAOS  AND  RUIN     109 

managed  as  part  of  the  Pennsylvania  sys 
tem.  Roberts  replied  that  Mr.  Vanderbilt 
and  other  rich  men  had  put  their  money 
into  it,  and  he  saw  no  reason  for  taking  it 
off  their  hands.  Vanderbilt,  as  a  matter  of 
fact,  did  not  want  to  sell,  although  he 
wanted  mightily  to  get  out  of  the  net  in 
which  he  found  himself  entangled. 

Meanwhile  Mr.  Morgan  had  been  to  see 
Frank  Thomson,  the  vice-president  of  the 
Pennsylvania.  He  said  to  Thomson  that 
he  had  become  convinced  that  something 
should  be  done  to  establish  harmony  among 
the  trunk  lines.  Thomson  said  that  there 
were  two  sores  to  be  healed:  one  was  the 
West  Shore  and  the  other  was  the  South 
Pennsylvania. 

"I  have  talked  that  matter  over  with  the 
New  York  Central  people,"  Mr.  Morgan  re 
plied,  "and  I  understand  that  they  will  take 
the  West  Shore  if  the  Pennsylvania  will 
take  the  South  Pennsylvania." 

"As  matters  stand,"  Thomson  said,  "I 
don't  see  how  it  can  be  done.  Mr.  Vander 
bilt  has  seen  fit  to  go  into  Pennsylvania. 
No  one  wanted  him  to  come  here  and  build 
a  railroad,  and  why  should  the  Pennsyl- 


110        J.  PIERPONT  MORGAN 

vania,  the  road  he  would  injure  most,  give 
him  back  the  money  he  has  expended  on  the 
South  Pennsyl vania  ?" 

Having  received  a  taste  of  the  opposition 
he  was  about  to  encounter,  but  not  in  the 
least  affected  by  it,  Mr.  Morgan  went  back 
to  New  York  and  saw  Chauncey  M.  Depew. 
They  went  over  the  details  of  the  West 
Shore  purchase,  and  made  some  definite  ar 
rangements;  before  very  long  Mr.  Morgan 
returned  to  Philadelphia. 

At  an  inquiry  which  was  afterwards  held 
to  investigate  the  South  Pennsylvania  deal, 
Mr.  Morgan  told  what  he  then  did : 

"It  being  believed,"  he  said,  "that  suffi 
cient  influence  could  be  brought  to  bear  on 
Mr.  Vanderbilt  to  induce  him  to  supply  a 
majority  or  more  of  the  South  Pennsyl 
vania  subscriptions,  I  made  a  trip  to  Phila 
delphia.  I  suggested  to  Roberts  and  Thom 
son  that  if  the  Pennsylvania  Railroad  was 
prepared  to  take  the  South  Pennsylvania 
for  bonds  or  any  other  security  that  bore 
three  per  cent.,  assuming  that  the  sum 
would  amount  to  five  and  a  half  millions  or 
over,  I  thought  the  thing  could  be  carried 
through.  Roberts  doubted  the  policy  or  the 


RAILROAD  CHAOS  AND  RUIN     111 

ability  of  the  Pennsylvania  Railroad  Com 
pany,  as  such,  to  buy  off  or  in  any  way  in 
terfere  with  what  might  be  considered  rival 
roads. 

"Later,  I  arranged  a  meeting  on  my 
yacht  between  Mr.  Roberts,  Mr.  Depew, 
Mr.  Thomson,  and  myself.  At  that  meet 
ing  there  was  practically  an  agreement 
reached  on  the  plan  as  ultimately  carried 
out.  The  amount  was  to  be  ascertained, 
the  accounts  were  to  be  examined  with  a 
view  to  arriving  at  the  cost  of  construction 
of  the  South  Pennsylvania,  and  this  cost 
was  to  be  covered  by  the  security  of  the 
Pennsylvania  Railroad  or  something  which 
should  pass  through  that  channel.  The 
only  thing  stipulated  was  that  the  security 
to  be  given  the  subscribers  was  to  bear  the 
absolute  guarantee  of  the  Pennsylvania 
Company. 

"Having  obtained  that  much  from  Rob 
erts,  we  went  to  work  again  with  Mr.  Van- 
derbilt  and  his  associates.  The  details  of 
wrhat  was  required  to  be  done  were  sent  me 
by  Mr.  Roberts.  It  was  then  necessary  to 
draw  up  the  papers.  Mr.  Roberts  said 
it  was  necessary  for  someone  to  be  the  pur- 


112        J.  PIERPONT  MORGAN 

chaser  other  than  the  Pennsylvania  Rail 
road.  As  a  firm  we  (Drexel,  Morgan  & 
Co.)  could  not  do  this,  but  as  an  individual, 
feeling  the  importance  of  what  was  at  stake, 
I  was  prepared  to  do  what  I  could,  and  to 
give  the  use  of  my  name  and  signature  to  act 
as  purchaser  of  one  for  the  other.  The  pa 
pers  were  made  out  in  this  way,  consisting 
of  a  form  of  contract  for  the  subscriber  to 
sign,  the  guarantee  that  the  subscribers  re 
quired  from  me  to  protect  them  from  any 
further  calls  from  the  purchaser,  and  an 
agreement  to  deliver  the  property." 

In  the  Morgan  account,  short  work  is 
made  of  the  Pennsylvania  opposition,  once 
so  strong.  An  agreement  was  reached,  says 
the  new  dictator  of  railroad  destinies.  But 
how?  We  shall  come  to  that  presently. 
The  curiosity  of  the  examiner  was  aroused 
by  the  circumstances  of  the  meeting  on 
board  the  Corsair. 

Q.  Mr.  Morgan,  was  there  anything  said  about  get 
ting  the  business  through  speedily? 

A.  I  do  not  remember  anything  in  particular  nor 
in  general.  When  I  have  business  on  hand  I  think 
it  is  better  to  have  it  done  quickly.  That  is  my 
experience. 

Q.  Why  did  you  go  on  the  yacht? 


EAILEOAD  CHAOS  AND  RUIN     113 

A.  Because  it  was  a  convenient  place. 
Q.  Then  it  was  not  for  the  purpose  of  having  no 
body  know  what  business  you  were  engaged  in  ? 

As  a  matter  of  fact,  Mr.  Roberts  went 
aboard  the  Morgan  yacht  protesting  that 
he  knew  his  own  mind.  He  had  said  he 
would  not  buy  a  hole  in  the  ground ;  a  hole 
in  the  ground — that's  what  the  so-called 
South  Pennsylvania  was  and  always  would 
be — and  a  rat  hole  for  money.  He  had 
always  said  he  wras  quite  willing  for  Mr. 
Vanderbilt  to  fry  in  his  own  fat,  and 
the  other  rich  men  along  with  him.  And 
he  saw  no  reason  to  change  his  opinion. 

The  Corsair  sailed  to  Sandy  Hook  and 
turned  and  cut  her  way  back  again  through 
New  York  Harbor.  She  entered  the  Hud 
son  River  and  kept  on  up  as  far  as 
West  Point,  then  turned  again  and  started 
back  to  Sandy  Hook.  Mr.  Morgan  said 
very  little;  he  smoked  black  cigars.  Mr. 
Depew  related  the  experience  that  the  Cen 
tral  had  had  with  the  West  Shore.  He 
showed  how  it  was  possible  for  a  great  rail 
road,  no  matter  how  prosperous,  to  be  cut 
into  and  weakened  in  all  its  resources  by  a 
rival  line  of  no  standing  whatever.  He 


114        J.  PIERPONT  MORGAN 

suggested  that  in  the  end  the  Pennsylvania 
would  find  it  much  more  costly  to  stand  out 
than  to  accept  Mr.  Morgan's  proposal. 

"That's  right!  That's  right!"  ex 
claimed  Mr.  Morgan.  " Can't  you  see  it? 
In  the  end  you  would  have  to  come  to  it.  In 
the  end  you  would  have  to  buy  out  or  con 
trol  this  other  road  only  to  make  your  con 
nections.  You  must  come  into  this  thing 


now.' 


Hours  slipped  away;  luncheon  had  been 
served ;  the  sun  no  longer  rode  high ;  every 
body,  except  Mr.  Morgan,  had  smoked 
more  of  the  black  cigars  than  were  good 
for  them.  Still  the  Corsair  churned  along. 

"But  why,"  objected  Mr.  Roberts, 
"should  we  make  ourselves  responsible 
for  others'  mistakes — why  pull  them  out 
of  the  hole  they  have  got  themselves  in 
to?" 

Mr.  Depew  drew  him  aside.  It  was 
clear  that  this  man  was  standing  out,  be 
cause  he  thought  someone  should  be  pun 
ished  for  getting  the  railroads  into  all  this 
mess.  He  thought  the  big  backers  should 
be  taught  a  lesson.  Depew  put  it  to  him 
that  these  men,  those  big,  rich  individuals, 


RAILROAD  CHAOS  AND  RUIN     115 

with  their  lack  of  sound  railroad  knowledge 
and  their  willingness  to  throw  their  cash 
into  the  wrong  places,  had  already  received 
severe  punishment.  It  was  true;  in  the 
scaling  down  of  debts,  in  the  sacrifice  of  in 
terest,  the  backers  were  bound  to  suffer. 
"Oh,  no,"  said  Mr.  Morgan,  striding  over, 
"they'll  not  get  out  whole." 

At  seven  o  'clock  in  the  evening  President 
Roberts  interrupted  the  silence  that  had  fal 
len  upon  all.  "Well,"  he  said,  "I  agree. 
All  right,  I  agree." 

The  thing  was  done.  The  personal  feel 
ings  of  two  men  had  been  sacrificed, 
Vanderbilt's  dreams  for  the  South  Penn 
sylvania,  Roberts 's  animosity.  The  South 
Pennsylvania  plan  went  through  as  already 
narrated,  and  in  the  case  of  the  West  Shore, 
President  Depew,  Mr.  Morgan,  and  Judge 
Ashbel  Green,  who  had  been  the  receiver, 
bid  in  the  road  at  a  foreclosure  sale  for 
twenty-two  millions  of  dollars.  The  Cen 
tral  agreed  to  guarantee  the  principal  and 
interest  upon  the  bonds  of  the  West  Shore, 
and  the  arrangements  were  all  but  perfected 
when  one  James  J.  Belden,  a  lawyer  of 
Syracuse,  after  obtaining  ten  shares  of  West 


116        J.  PIERPONT  MORGAN 

Shore  stock,  asked  the  courts  for  an  injunc 
tion  to  prevent  the  road  from  becoming  the 
property  of  the  New  York  Central. 

This  was  a  blow, — especially  to  Depew  and 
Green,  who  had  made  themselves  responsible 
for  the  success  of  the  reorganisation  plan. 
In  case  of  a  serious  hitch  they  might  have 
to  pay  twenty-two  millions  themselves.  The 
situation  dragged  itself  out  and  the  bond 
holders  began  to  become  interested.  It  was 
said  that  there  was  a  syndicate  backing 
Belden.  What  was  his  price  for  his  ten 
shares  of  stock?  One  million  dollars! 
That  was  his  asking  price.  Depew  got  a 
better  bargain  than  this,  but  the  price  he 
had  to  pay  was  the  highest  ever  paid  for  any 
ten  shares  of  stock. 

When  all  was  finally  settled,  rate-cutting 
ended  instantly ;  and  the  whole  railroad  sit 
uation  improved  rapidly;  James  D.  Layng 
was  called  from  the  Chicago  &  Northwest 
ern  to  operate  the  West  Shore  in  harmony 
with  the  Central.  The  New  York  Central 
now  owns  all  the  common  stock  of  the  West 
Shore,  and  has  infused  credit  into  its  bonds. 
As  matters  turned  out  the  terminals  owned 
by  the  West  Shore  are  to-day  worth  more 


RAILROAD  CHAOS  AND  RUIN     117 

than  the  Central  paid  for  the  entire  prop 
erty. 

People  living  along  the  Central's  lines  had 
been  enjoying  cheap  rates  at  the  expense  of 
the  railroad,  and  the  truth  is,  it  was  time. 
During  the  great  railroad  wars  of  '77,  '78, 
and  '79,  when  through  rates  were  reduced 
to  far  below  the  cost  of  transportation,  the 
Central  continued  to  pay  regularly  eight 
per  cent,  dividend  on  its  enormous  capitali 
sation.  It  was  enabled  to  do  this  out  of  the 
splendid  local  traffic;  the  local  shippers 
made  up  the  losses  incurred  by  the  cheap 
through  business.  Therefore,  the  people 
had  looked  upon  the  West  Shore,  which  pro 
posed  to  open  the  doors  to  competition,  as  a 
benefactor;  its  failure  caused  deep  disap 
pointment.  The  question  which  concerned 
them  was  not  the  loss  to  the  bondholders  of 
the  West  Shore  nor  the  benefit  which  would 
now  come  to  the  stockholders  of  the  Central ; 
the  point  that  came  home  to  them  was  the 
broader  matter  of  the  effect  of  the  consol 
idation  upon  the  country  through  which  the 
two  roads  ran. 

Local  shippers  found  themselves  once 
more  at  the  mercy  of  a  monopoly,  and  could 


118        J.  PIERPONT  MORGAN 

only  hope  that  the  railroad  would  not  pur 
sue  a  short-sighted  policy  in  the  treatment  of 
its  local  patrons. 

"We  must  rely  on  public  opinion  to  get 
a  fair  deal,"  it  was  said,  "but  it  cannot  be 
denied  that  this  absorption  brings  us  face  to 
face  with  the  great  railroad  problem." 
This  was  a  totally  different  side  of  the  rail 
road  question  from  the  one  that  Mr.  Morgan 
had  attacked. 

It  need  not  be  remarked  that  it  wras  just 
as  necessary  of  solution  as  any  of  the  in 
tricate  financial  questions  he  undertook  to 
settle.  Mr.  Morgan  felt,  however,  that  be 
fore  the  rate  question  could  become  the  issue 
of  first  importance,  it  was  necessary  to  place 
the  railroads  themselves  in  a  position  to 
continue  to  do  business.  He  showed  that  he 
was  the  one  man  who  could  accomplish  this, 
and  for  the  next  ten  years  of  his  life  he  was 
allowed  to  do  very  little  else. 

He  began  to  figure  in  directorates.  At 
the  board  meetings  Mr.  Morgan  usually 
chose  the  part  of  attentive  listener,  not  often 
volunteering  suggestions,  and  responding  in 
a  brief,  laconic  manner  to  any  request  for 
information. 


RAILROAD  CHAOS  AND  RUIN     119 

One  who  served  upon  several  boards  with 
Mr.  Morgan  recalls  the  following  impres 
sions,  reprinted  here  in  his  own  words : 

"I  early  became  impressed  with  the  fact 
that,  with  a  single  exception,  I  never  saw 
him  irritated  or  disposed  to  yield  in  the 
slightest  to  a  sense  of  annoyance,  unless 
something  was  suggested  that  seemed  to  be 
more  or  less  in  the  line  of  trickery.  He  al 
ways  stood  for  straight  dealing,  and  that, 
too,  notwithstanding  the  fact  that  he  \\as  a 
master  financial  diplomatist,  possessing 
great  intellectual  resources,  and  intuitive 
judgment,  the  like  of  which  I  have  never 
seen. 

"The  only  time  I  ever  saw  Mr.  Morgan 
show  that  he  was  annoyed  was  at  one  of 
the  board  meetings  of  those  days.  A  sub 
ordinate  officer  of  a  railway  corporation 
brought  in  a  document  or  a  report  contain 
ing  the  names  of  the  directors,  and,  among 
others,  the  name  of  Mr.  Morgan,  who 
glanced  in  turn  at  the  document ;  and,  after 
looking  at  it  a  moment,  threw  it  on  the  table. 
He  pointed  to  his  name  and  said,  angrily, 
'That  isn't  the  way  to  spell  my  name,  I  want 
it  corrected.  M}r  name  is  spelt  Pierpont, 


120        J.  PIERPONT  MORGAN 

not  Pierrepont;  and  I  should  be  pleased  if 
that  would  be  understood  hereafter  in  this 
office/ 

"If  there  appeared  in  print  an  article 
praising  him  for  anything  he  had  done,  and 
his  name  was  spelt  Pierrepont,  that  lapse 
outweighed  anything  that  was  said." 

An  extremely  sensitive  man  to  small 
things,  to  criticism,  he  was  indifferent  to  at 
tack,  to  notoriety,  and  his  friends  say  that 
even  at  this  early  day,  he  regarded  the  grad 
ual  creeping  of  his  name  into  the  news 
papers,  either  with  absolute  indifference  or 
with  a  mild  curiosity,  as  though  he  won 
dered  why  anything  that  he  did,  and  espe 
cially  his  personality,  should  be  of  the 
slightest  interest  to  the  public. 


CHAPTER  VII 

THE   BEGINNING  OF  FEUDAL  FINANCE 

AT  fifty,  a  good  proportion  of  the  men 
of  history  have  found  their  work,  won 
fame,  and  been  laid  away.  At  fifty,  the 
subject  of  these  articles  was  unknown  ex 
cept  in  his  own  circle;  the  newspapers 
rarely  mentioned  his  name,  and  then  only 
in  a  bare  sentence,  as  if  it  were  the  name  of 
a  railroad  or  a  bank.  An  element  of  fas 
cination  may  be  found  in  the  unstudied 
mediocrity  of  this  future  financial  power; 
it  makes  us  think  of  Stonewall  Jackson, 
middle-aged  and  grown  a  bit  pedantic,  teach 
ing  arithmetic  in  the  late  fifties;  or  Grant 
serving  under  Halleck  near  the  beginning  of 
the  war.  J.  P.  Morgan  served  his  clients, 
the  investors,  and  so  added  to  his  fortune 
year  by  year.  Also  he  took  a  share  in  the 
bankers'  syndicates  that  sold  bonds  for  the 
Government  or  the  railroads. 

But,   in  the  meanwhile,   a   great  many 
121 


122        J.  PIERPONT  MORGAN 

things  were  going  utterly  wrong;  things 
which  vitally  affected  Mr.  Morgan  himself, 
and  all  his  people — the  investing  public, 
here  and  in  England.  The  great  railroad 
systems  were  running  down  hill,  financially ; 
they  were  ceasing  to  pay  dividends,  and  in 
a  large  number  of  cases  they  were  rapidly 
sliding  into  the  position  where  the  bond 
holders  would  cease  to  receive  interest  on 
their  holdings,  and  would  be  lucky  if  they 
did  not  lose  part  of  their  principal  as  well. 

Nor  was  there  any  sound  reason  for  such 
a  condition  of  things.  To  J.  P.  Morgan  the 
cause  was  as  plain  as  day ;  in  his  opinion,  it 
was  fool  management. 

The  railroads  of  the  country  were  at  war, 
almost  continually,  one  with  another.  It 
was  slaughterous,  savage  warfare,  costing 
as  much  in  everything  but  lives  as  fighting 
with  cannons  and  muskets.  And  Mr.  Mor 
gan's  friends  paid  the  cost — they  always 
paid.  And  the  wars  became  bitterer  and 
more  expensive  every  year.  The  situation 
was  intolerable.  Eastern  people,  through 
their  bankers,  had  bought  largely  of  railroad 
securities;  wisdom  could  prompt  no  surer 
method  of  obtaining  a  return  upon  spare 


FEUDAL  FINANCE  123 

capital.  Quiet  homes  in  the  far-away  coun 
ties  of  England  were  supported,  or  sup 
posed  to  be  supported,  by  the  returns  from 
American  railways.  These  English  im 
agined  they  were  taking  shares  in  the 
conquest  and  development  of  this  extraordi 
nary,  new,  rich  land;  it  was  their  faith 
which  touched  Mr.  Morgan  most  keenly,  be 
cause  it  affected  the  honour  of  the  London 
house.  If  they  could  have  seen  with  their 
own  eyes  how  the  railroads  of  the  period 
were  pouring  their  money  into  a  sluiceway 
they  would  never  have  survived  the  shock. 

For  example: 

Imagine  the  Gilt  Edge  Flyer  of  the  C.  & 
O.  "W.  tearing  at  unbelievable  speed  east 
ward,  and  the  Silver  Plate  Limited  of  the 
renowned  K.  &  J.  line  hastening  westward 
like  a  cannon  shot — upon  the  same  track 
—the  same  pair  of  rails. 

The  presidents  of  the  respective  rival 
lines  sit  back  and  receive  their  reports, 
brought  to  them  by  wire.  In  an  hour,  in 
half  an  hour,  in  a  very  few  minutes,  in  a 
second  or  two — so  the  time  passes — they 
will  learn  of  a  heaven-wrecking  smash, 
head-on. 


124        J.  PIEEPONT  MORGAN 

The  moment  arrives.  The  two  trains 
completely  demolish  each  other.  There  is 
an  enormous  bill  of  damages,  a  hole  in  the 
fertile  prairie — and  some  advertising.  To 
pay  the  bill  some  more  securities  must  be 
sold.  From  the  viewpoint  of  both  railroads 
this  striking  affair  was  a  perfectly  reason 
able  occurrence.  "The  other  fellow  was 
on  my  track;  I  warned  him  off  first,"  ex 
cuses  the  president  of  the  (imaginary)  C. 
&  0.  W.  Ditto  the  unhesitating  chief  of 
the  progressive  K.  &  J. 

This  is  an  illustration,  not  an  instance; 
it  is  the  situation  simplified.  The  actual 
instances  consisted  of  innumerable  ticket 
scalping  deals — tickets  disposed  of  by  the 
thousand  at  half  price  to  brokers  like  the 
celebrated  Frank;  or  freight  rates  nailed 
for  a  week  to  a  dead  tree  in  the  woods  in 
evasion  of  the  provision  requiring  public 
posting  of  rates,  and  taken  down  again  when 
the  stolen  business  has  been  run  through. 
All  the  roads  lost  heavily  by  these  chicaner 
ies.  Those  who  won  most  lost  most,  be 
cause  they  won  business  at  the  price  of 
carrying  it  for  less  than  cost.  And  yet,  if 
they  held  back,  refused  to  take  a  hand  in  the 


FEUDAL  FINANCE  125 

greedy  game,  they  ran  empty  trains — and 
lost  more  still ! 

There  was  no  logic  in  this  business.  It 
was  not  business;  it  was  a  dog-fight.  The 
conservative  journals  of  the  day,  unable  to 
find  the  word  for  it,  coined  a  phrase — they 
called  it  Criminal  Competition. 

The  railway  management  was  scarcely  to 
blame.  It  faced  a  condition.  Its  other 
alternative  was  to  go  out  of  business.  The 
blame  came  back  to  the  speculators  who 
overbuilt  the  mileage  of  the  country,  con 
structed  useless  parallel  lines,  or  flung  out 
easily  obtained  dollars  upon  the  uninviting 
landscape  wrhere  no  business  was,  or  per 
haps,  ever  would  be.  They  made  their  own 
fortunes  in  construction  and  got  safely 
away  with  them,  leaving  the  railroad  prob 
lem  for  others.  This  narrative  has  already 
gone  into  the  details  of  these  enterprises. 
For  the  present  it  is  enough  to  bear  in  mind 
that  a  country  as  good  as  a  gold  mine  had 
been  overworked  for  a  crazy  decade — and 
that  the  panic  of  1893  was  fast  approach 
ing,  and  preparing. 

For  Mr.  Morgan's  English  friends  there 
was  this  exhibit  in  the  year  '89.  Of 


126        J.  PIERPONT  MORGAN 

American  railway  securities  listed  on  the 
London  Stock  Exchange,  to  the  amount  of 
five  hundred  and  six  millions,  only  one  com 
pany  was  paying  dividends  on  its  common 
stock,  and  but  two  or  three  on  preferred. 
The  London  Statist  noted  in  clear  type  that 
"the  consequences  of  rate  wars  on  American 
railways  are  proving  so  disastrous  to  the 
holders  of  securities,  and  the  prospects  are 
so  gloomy,  that  some  heroic  remedy  must  be 
resorted  to,  else  the  whole  investment  will 
be  lost." 

Within  thirteen  years  423  American  rail 
road  companies,  with  a  total  mileage  of 
43,770  miles,  representing  more  than  two 
and  a  half  billions  of  capital,  had  gone  the 
way  to  dusty  death — in  bankruptcy. 

For  the  calendar  year  1888  the  gross 
earnings  of  ninety-five  railroads  amounted 
to  $622,659,427,  an  increase  of  $20,403,147, 
or  about  three  and  a  half  per  cent,  over  the 
total  of  1887.  But  their  net  earnings  for 
the  year  were  $202,544,600,  a  decrease  as 
compared  with  the  net  earnings  of  the  pre 
ceding  year  of  $14,481,996,  or  about  six  per 
cent. 

They   had   done   twenty   million   dollars 


FEUDAL  FINANCE  127 

more  business  in  '88  than  in  '87,  but  earned 
fourteen  million  dollars  less  money. 

As  for  the  stockholders,  their  informa 
tion  was  fragmentary;  they  scarcely  knew 
anything  about  the  affairs  of  the  roads  of 
which  they  were  sole  owners,  and  whose 
affairs  they  were  supposed  to  run.  Doubt 
less  they  might  have  put  together  the  pieces 
of  information  that  were  gingerly  passed 
out  to  them — if  they  had  tried;  and  might 
have  made  an  intelligible  whole.  But  they 
seldom  tried.  The  larger  the  railroad  sys 
tem,  the  less  active  attention  given  to  its 
affairs  by  those  primarily  interested  in  its 
well-being.  And  they  were  smoothed  down 
by  bookkeeping  fictions.  In  a  great  many 
instances  what  passed  for  the  corporate  sur 
plus  of  a  railroad  company  resembled  the 
celebrated  forty-eight  million  dollar  one  of 
the  Baltimore  &  Ohio,  which  proved  a 
bookkeeping  tale.  It  included  all  net  earn 
ings  in  excess  of  dividends,  and  by  charging 
off  depreciation  and  errors,  was  reduced, 
by  a  brief  calculation,  to  a  most  modest 
basis. 

But  in  New  England  there  were  some 
stockholders  insurgent.  At  the  annual 


128        J.  PIERPONT  MORGAN 

meeting  of  the  Fitchburg  road  they  passed 
a  vote  unanimously  directing  the  manager 
to  publish  regular  monthly  statements  of 
gross  earnings,  and  regular  quarterly  state 
ments  of  gross  earnings,  expenses,  net  earn 
ings,  and  the  proportion  of  fixed  charges 
and  rentals  assignable  to  these  quarters — a 
most  practical  and  illuminating  step.  This 
was  one  of  those  roads  which  preserved  the 
old-fashioned  custom  of  having  its  officers 
meet  the  stockholders  in  person  at  its  an 
nual  meeting.  The  Illinois  Central  and  the 
Chicago,  Burlington  &  Quincy  manage 
ments  were  publicly  attacked  by  their  stock 
holders. 

Sometimes  these  sudden  displays  of  in 
terest  in  hitherto  neglected  business  were 
useful,  but  not  often.  On  the  whole  the 
enormous  and  distended  railroad  industry, 
with  its  mass  of  cumbersome  conditions,  ill- 
assorted,  overt,  and  tricky  details,  continued 
to  remain  an  unfathomable  scandal  and  ob 
ject  of  alarm. 

And,  meanwhile,  there  was  Mr.  Morgan, 
the  future  King  of  Money — but,  in  those 
days,  simply  a  banker,  with  ideas,  with 
methods,  which  he  had  put  into  practice  in 


FEUDAL  FINANCE  129 

his  own  business  for  three  decades.  We 
have  arrived  at  the  exact  point^m  his  life 
when  the  Morgan  that  we  now  know  was 
setting  out  on  his  journey  toward  the  spe 
cial  pinnacle  he  has  attained;  when  he  took 
his  first  step  away  from  the  beaten  path  of 
routine  business,  and  undertook,  in  his  priv 
ate  capacity,  public  work.  The  point  when, 
in  the  language  of  some,  he  set  out  to  gobble 
up  the  wealth  of  the  country,  or,  as  others 
see  it,  when  he  started  in  to  run  our  business 
for  us  in  the  way  he  thought  it  ought  to  be 
run ;  or,  as  still  a  third  party  sees  it,  when 
he  decided  to  become  a  public  benefactor 
and  to  render  a  kind  of  financial  service  for 
the  rest  of  his  days. 

In  other  words,  the  question  of  Mr.  Mor 
gan's  motive,  of  his  moral  feeling,  is  to  be 
answered  by  the  events  of  his  career,  begin 
ning  now — with  the  year  1885  and  continu 
ing  thereafter. 

Following  the  actual  happenings  in  J.  P. 
Morgan's  life  will  lead  us  to  but  one  con 
viction,  namely,  that  the  first  and  the  third 
views  of  the  money  king  noted  above  are 
both  somewhat  romantically  false,  and  that 
the  second — which  holds  that  his  primary 


130        J.  PIERPONT  MORGAN 

interest  in  affairs,  the  moral  axis  upon  which 
his  career  turns  as  a  whole,  is  a  natural  pas 
sion  for  sound,  well-founded  business,  with 
out  logical  flaws  or  sapping  weaknesses — is 
very  nearly  the  true  view  of  him. 

It  is  as  nearly  true  as  any  analysis  of  a 
human  being  can  be  which  does  not  fill  a 
volume  and  explain  or  account  for  every 
thing.  As  we  go  on  we  shall  have  to  dis 
entangle  situations  made  up  of  an  intricate 
mixture  of  motives,  in  some  of  which  the 
colour  bears  out  either  one  or  the  other  of 
two  conceptions  of  Mr.  Morgan  we  have 
called  false.  No  matter  for  that ;  since  it  is 
the  man  himself  we  seek,  and  no  caricature, 
we  shall  find  these  complications  doubly  in 
teresting. 

In  the  year  1885  he  suddenly  felt  it  driven 
in  by  successive  shocks  that  he  must  do 
something  about  the  railroads.  With  Mr. 
Morgan  it  is  always  do  nothing,  or  do  every 
thing;  sit  by,  or  take  charge.  We  related 
in  the  last  chapter  what  he  did  with  the  West 
Shore-New  York  Central,  and  the  Pennsyl 
vania  Eailroad  tangles.  He  did  not  take 
sides ;  he  took  command.  Using  the  logic  of 
sound  business  as  a  big  stick,  he  compelled 


FEUDAL  FINANCE  131 

the  irreconcilables  to  submit  to  Ms  plans, 
when  no  one  thought  such  an  outcome  pos 
sible. 

He  had  scarcely  finished  with  his  business 
when  another,  still  more  ragged,  menacing 
situation,  confronted  him — the  demoralisa 
tion  of  the  great  Philadelphia  &  Reading 
Railroad. 

The  Reading  was  one  of  the  largest  rail 
road  companies  in  existence.  It  had  a 
capitalisation  amounting  to  hundreds  of  mil 
lions,  and  an  earning  capacity  of  forty  mil 
lions  a  year.  It  was  an  immense  and 
permanent  machine  for  turning  out  dollars 
profit — but  there  was  something  very  wrong 
with  its  economy,  for  it  did  not  even  pay  its 
way. 

When  a  little  business  gets  into  difficul 
ties,  the  process  is  painful,  but  not  exciting 
to  contemplate,  except  for  those  immedi 
ately  concerned.  The  final  catastrophe 
falls  on  only  one  or  two  people,  and  it  is 
usually  true  that  a  little  more  money  would 
have  saved  it.  But  when  a  big  business  be 
gins  to  fall  into  ruins,  it  is  something  appall 
ing  to  watch — especially  a  railroad.  A  rail 
road  cannot  shut  up  shop  and  pull  up  its 


132        J.  PIERPONT  MORGAN 

tracks.  It  can  never  be  given  up  for  dead 
— its  disease  must  be  cured,  take  how  long 
it  will,  cost  what  it  will.  A  bankrupt  rail 
road  is  fated  to  sprawl  supine  upon  the 
breasts  of  its  wretched  security  holders,  and 
those  whom  it  doesn't  pauperise  at  once  it 
frightens  half  to  death  with  its  monstrous 
and  mounting  expense  bill.  Its  difficulties 
must  be  met,  but  how?  This  is  no  affair  of 
the  grocer's  shop,  this  Cyclopean  ruin. 
With  its  thousand-fold  complications  it  pre 
sents  a  problem  which  mere  shrewdness, 
good  judgment,  experience,  cannot  hope  to 
solve.  The  records  of  the  various  bond 
holders'  committees  prove  this  statement 
true. 

The  condition  of  the  Beading  was  this: 
Its  annual  fixed  interest  charges  amounted 
to  $6,300,000.  Of  the  1,586  miles  of  road, 
1,152  miles  were  held  under  lease,  at  an 
annual  rental  of  $9,371,021.  In  short, 
Reading  must  earn  $15,667,058  net  to  meet 
its  charges.  In  addition  to  this  there  was 
at  the  close  of  the  year  1885  a  floating  debt 
of  $25,000,000,  the  interest  upon  which 
brought  up  the  total  income  required  to 
$17,000,000. 


FEUDAL  FINANCE  133 

Against  this  crushing  load  the  Eeading 
showed  an  earning  capacity  during  three 
years  past  as  follows: 

Net 
earnings  Charges  Results 

1883 $  8,339,934   $  6,816,183   *  $1,523,751 

1884 13,396,534    16,874,453   f  3,355,251 

1885 12,527,569    17,125,451   1 4,597,882 


*Surplus.  fDeficit. 

And  the  year  1886  showed  a  deficit  of 
nearly  six  millions. 

When  Mr.  Morgan  undertook  the  task  of 
replacing  these  millions  of  yearly  loss  with 
a  yearly  gain  he  met  with  unexpected  diffi 
culties.  A  railroad  reorganisation  resem 
bles  a  pruning  process  and  financiers  may 
differ  as  much  as  orchardists  as  to  the 
degree  of  severity  required.  The  process 
mainly  consists  of  lopping  off  interest 
charges  by  exchanging  the  present  bonds 
for  others  of  a  new  issue  bearing  a  lower 
rate  of  interest.  Another  feature,  almost 
equally  inevitable,  is  a  cash  assessment  upon 
the  shareholders,  of  a  certain  sum  for  each 
share  of  stock.  To  put  this  through  it  is 
necessary  to  get  the  consent  of  the  secur 
ity  holders  themselves.  As  there  are  always 


134        J.  PIERPONT  MORGAN 

many  classes  of  securities,  and  as  all  do  not 
suffer  alike,  there  is  room  for  a  vast  and 
acrimonious  difference  of  opinion  concern 
ing  any  plan  that  is  proposed.  In  the  pres 
ent  instance  it  was  announced  early  in  the 
spring  of  1886  that  a  combination  of  bank 
ers  had  been  formed  to  reorganise  Reading, 
and  that  the  firm  of  Drexel,  Morgan  &  Co. 
was  underwriting  the  plan,  through  a  syn 
dicate  with  a  capital  of  fifteen  millions.  But 
it  turned  out  that  the  security  holders  were 
unwilling  to  accept  the  sacrifices  demanded 
of  them,  and  the  Morgan  plan  also  met 
with  the  determined  opposition  of  the  presi 
dent  of  the  road,  Franklin  B.  Gowen,  who 
had  the  backing  of  a  large  following.  After 
some  weeks  of  fruitless  labor  Mr.  Morgan 
drew  back  and  left  the  field  to  Gowen,  who 
got  up  a  scheme  of  his  own.  Failing  to  ob 
tain  backing  for  his  plan,  Gowen  had  to 
step  down,  and  Austin  Corbin  was  made 
president,  and  in  the  fall  of  '87  Mr.  Morgan 
put  his  own  plan  through.  By  cash  assess 
ments,  which  by  this  time  the  security 
holders  were  willing  to  yield,  the  big  float 
ing  debt  was  wiped  out.  Interest  charges 
were  reduced  several  millions  below  the 


FEUDAL  FINANCE  135 

amount  of  the  net  earnings,  and  in  its  next 
report  the  wrecked  railroad  showed  a  profit 
of  nearly  three  millions. 

This  reorganisation  was  regarded  as  a 
wonderful  piece  of  work  at  the  time ;  it  was 
said  that  Heading's  affairs  had  been  so  re 
adjusted  that  the  road  could  never  again, 
under  any  possible  circumstances,  drift  into 
bankruptcy.  But  in  making  this  remark, 
the  prophet  tripped  and  fell.  The  road  had 
not  been  made  fool  proof  by  any  means; 
within  five  years  it  was  back  again  on  Mr. 
Morgan's  hands. 

When  Austin  Corbin  became  president 
he  enlisted  on  his  official  staff  a  protege 
named  McLeod,  who  was  destined  to 
achieve  the  nickname  of  the  Napoleon  of 
the  railroad  world,  to  occasion  a  Congres 
sional  investigation  of  his  operations,  and  to 
irritate  insufferably  J.  P.  Morgan.  Mc 
Leod  became  president  of  the  Reading  after 
Corbin  resigned  and  undertook  to  form  a 
vast  coal  monopoly  in  connection  with  New 
England  roads.  He  leased  lines  and  formed 
alliances  which  required  millions  more  capi 
tal  than  he  could  command.  The  price  of 
coal  was  raised  to  the  consumer,  which  en- 


136        J.  PIERPONT  MORGAN 

raged  the  public.  In  extending  his  control 
into  New  England,  McLeod  fell  foul  of  the 
New  York  and  New  Haven,  in  which  Mr. 
Morgan  was  greatly  interested;  his  attacks 
on  the  New  Haven  proved  to  be  the  last 
straw.  Mr.  Morgan,  representing  the  en 
tire  banking  community,  undertook  to  disci 
pline  McLeod,  who  resented  his  interfer 
ence,  and  would  not  accept  his  suggestions. 
"I  would  rather,"  said  he,  "run  a  peanut- 
stand  than  be  dictated  to  by  J.  P.  Morgan." 
In  the  spring  of  1893  he  resigned,  leaving  a 
wrecked  property  behind  him.  Mr.  Mor 
gan  had  his  work  of  reorganisation  all  to 
do  over  again,  and  in  a  panic  year.  He  was 
busy  with  another  and  even  more  difficult 
affair  at  the  time,  and  did  not  give  his  atten 
tion  to  Reading.  The  new  management  un 
dertook  to  reorganise  the  road,  but  its  plans 
met  with  a  chilling  reception  from  the  se 
curity  holders.  They  could  not  see  where 
they  were  coming  out,  and  they  refused  to 
make  any  more  sacrifices. 

At  last  the  bondholders  appealed  directly 
to  Mr.  Morgan  to  do  the  job,  and  once  more 
he  reorganised  Reading.  In  the  eight  years 
that  had  passed  the  road  had  acquired  a 


FEUDAL  FINANCE  137 

new  floating  debt,  eighteen  millions  this 
time,  which  must  be  disposed  of  as  before. 
When  he  had  finished  the  work  Mr.  Morgan 
kept  the  control  of  the  road  in  his  own 
hands.  He  took  no  chances  of  permitting 
an  enterprise  which  required  careful  treat 
ment  to  fall  into  the  hands  of  any  wild 
cat  management,  and  the  security  holders 
were  at  one  with  him  on  that.  Unable  or 
unwilling  to  look  after  their  own  interests, 
they  were  only  too  glad  to  have  Mr.  Morgan 
do  it  for  them.  And  after  this  experience 
Mr.  Morgan  invariably  retained  control  of 
the  railroads  he  reorganised,  either  through 
the  spiral  device  of  a  voting  trust,  or  a  con- 
trolling  ownership  of  stock.  In  this  way, 
and  at  this  time,  the  feudal  position  which 
he  now  occupies,  the  one-man  power  in 
American  finance  which  he  is,  had  its  be 
ginning. 

During  these  years  the  general  railroad 
situation  was  going  from  bad  to  worse.  In 
the  West  the  newer  and  younger  roads  were 
rapidly  approaching  the  abyss  of  bank 
ruptcy,  and  in  the  year  1889  Mr.  Morgan 
made  a  determined  and  novel  effort  to 
impress  them  with  the  need  of  complete  re- 


138        J.  PIERPONT  MORGAN 

form.  The  Western  railway  presidents 
had  their  own  organisation,  which  had 
attended  to  the  pooling  of  business  be 
fore  pooling  was  forbidden  by  the  new  In 
terstate  Commerce  law ;  now  the  association 
was  supposed  to  work  in  harmony  on  the 
basis  of  a  "  gentlemen's  agreement" — 
which  no  gentleman  kept.  In  the  last  week 
of  December,  '88,  Mr.  Morgan  invited  the 
Western  presidents  to  meet  the  bankers  at 
his  house  on  Madison  Avenue.  The  ob 
ject  of  the  meeting  was  to  bring  about  con 
certed  action  and  stop  the  suicidal  rate  cut 
ting.  This  first  meeting  was  adjourned 
until  January  8.  And  between  the  two 
meetings,  more  rate  cutting  took  place,  so 
that  when  the  presidents  met  they  were  in  no 
good  humour  with  themselves  or  with  one 
another. 

There  were  Charles  Francis  Adams,  of 
the  Union  Pacific;  Marvin  Hughitt,  of  the 
Chicago  &  Northwestern;  R.  R.  Cable,  of 
the  Rock  Island;  Frank  S.  Bond,  of  the 
Chicago,  Milwaukee  &  St.  Paul ;  Jay  Gould, 
and  his  son,  George,  of  the  Missouri  Pa 
cific;  A.  B.  Stickney,  of  the  Chicago, 
St.  Paul  &  Kansas  City,  and  half  a 


FEUDAL  FINANCE  139 

dozen  others  from  the  railroads.  Repre 
senting  the  bankers,  besides  Mr.  Morgan, 
were  J.  Hood  Wright,  of  the  Morgan  firm ; 
John  Crosby  Brown,  of  Brown  Brothers; 
George  P.  Magoun,  of  Kidder,  Peabody  & 
Co.,  and  the  Barings,  and  also  two  or  three 
others. 

The  men  who  ran  railroads  and  the  men 
who  furnished  the  money  to  construct  them 
were  face  to  face  for  the  first  time  at  a  for 
mal  meeting.  It  was  purely  a  business  oc 
casion.  To  put  it  simply,  the  represent 
atives  of  capital  intended  to  show  the  rail 
road  men  the  whip.  They  intended  to  con 
vey  to  them  a  very  definite  impression  that 
further  misbehaviour  would  be  punished  by 
cutting  off  the  supplies.  Mr.  Morgan  him 
self  did  not  mince  matters  in  wrhat  he  said ; 
he  thought  it  a  time  for  plain  speech. 

"The  purpose  of  this  meeting,"  he  said, 
"is  to  cause  the  members  of  this  associa 
tion  to  no  longer  take  the  law  into  their 
own  hands  when  they  suspect  they  have 
been  wronged,  as  has  been  too  much  the 
practice  heretofore. 

"This  is  not  elsewhere  customary  in 
civilised  communities,  and  no  good  reason 


140        J.  PIERPONT  MORGAN 

exists  why  such  a  practice  should  continue 
among  railroads." 

President  Roberts,  of  the  Pennsylvania, 
retorted:  "Speaking  in  behalf  of  the  rail 
road  people  of  this  country,  I  object  to  this 
very  strong  language,  which  indicates  that 
we,  the  railroad  people,  are  a  set  of  anarch 
ists,  and  this  is  an  attempt  to  substitute  law 
and  arbitration  for  anarchy  and  might." 

There  was  a  silence,  and  then  Stickney 
said  he  opposed  secret  meetings  like  the 
present  one.  "The  public,"  he  added,  "are 
sure  to  think  we  are  conspiring  to  do  some 
thing  that  we  ought  not  to  do." 

No  one  agreed  with  Stickney  upon  this 
point.  Roberts  made  a  speech  in  which  he 
dwelt  upon  the  fact  that  the  building  of  use 
less  parallel  lines  was  responsible  for  all  the 
troubles  of  the  railroads.  He  pointed  to 
the  bankers  as  the  persons  who  could  put  a 
stop  to  this  if  they  would.  And  he  repeated 
his  complaint  concerning  Mr.  Morgan's 
strong  language,  saying:  "I  cannot  help  but 
feel  that  it  is  a  little  harsh  language  for  us 
to  hold  here,  but  I  can  stand  it,  I  suppose, 
if  the  others  can." 

Ignoring  this  last  remark,  Mr.  Morgan 


FEUDAL  FINANCE  141 

came  straight  to  the  point:  "In  regard  to 
the  remarks  made  by  Mr.  Roberts  in  regard 
to  the  bankers  and  the  construction  of  par 
allel  lines,  I  am  authorised  to  say,  I  think, 
in  behalf  of  the  houses  represented  here, 
that  if  an  organisation  can  be  formed  which 
shall  accomplish  the  purposes  of  this  meet 
ing,  and  with  an  Executive  Committee  able 
to  enforce  its  provisions,  upon  which  the 
bankers  shall  be  represented,  they  are  pre 
pared  to  say  that  they  will  not  negotiate  and 
will  do  everything  in  their  power  to  prevent 
the  negotiation  of  any  securities  for  the  con 
struction  of  parallel  lines,  or  the  exten 
sion  of  lines  not  unanimously  approved  by 
the  Executive  Committee.  I  wish  that  dis 
tinctly  understood." 

Next,  Mr.  Adams  expressed  his  mind  in 
a  little  speech,  saying,  "The  difficulty  in 
railway  management  does  not  lie  in  an  act 
of  legislature,  State  or  National,  but  does 
lie  in  the  covetousness,  want  of  good  faith, 
and  low  moral  tone  of  railway  managers, 
in  the  complete  absence  of  any  high  stand 
ard  of  commercial  honour.  Now  the  ques 
tion  we  are  to  decide  here  to-day  is  whether 
any  gentleman  representing  a  railroad  com- 


142        J.  PIERPONT  MORGAN 

pany  is  prepared  to  stand  up  and  say  be 
fore  the  public  and  before  us  that  he  is 
opposed  to  obeying  the  law,  and,  further, 
that  in  matters  of  controversy  he  prefers  to 
take  the  law  into  his  own  hands  rather  than 
submit  to  arbitration.  That  is  the  whole 
thing  in  a  nutshell." 

Mr.  Hughitt  did  not  agree  that  it  could 
be  put  in  a  nutshell  thus.  He  did  not  see 
how  he,  as  president  of  his  road,  could  agree 
to  submit  the  interests  of  his  people  to  arbi 
tration. 

There  was  much  more  discussion;  at 
times  the  meeting  resembled  a  meeting  of 
the  chiefs  of  the  fighting  clans  of  Scotland ; 
each  man  was  passionately  certain,  convinced 
in  his  own  mind,  that  his  neighbour,  not  he, 
was  at  fault.  Some  fair  sounding,  though 
nearly  futile,  resolutions  were  formally 
passed.  It  was  agreed  to  discourage  dealing 
with  scalpers,  and  a  board  to  hear  com 
plaints  of  rate-cutting  was  appointed.  This 
board  was  given  the  power  to  fine  roads 
which  failed  to  keep  the  schedule,  and  each 
road  had  to  put  up  a  thousand  dollars,  out 
of  which  fines  would  be  paid.  This  far-see 
ing  provision  indicated  clearly  enough  to 


FEUDAL  FINANCE  143 

the  public  the  fundamental  futility  of  the 
attempted  arrangement,  since  it  showed  how 
little  the  roads  trusted  one  another,  and  it 
was  not  thought  that  any  road  would  be  held 
back  very  long  by  mere  fines. 

However,  the  meeting  shows  what  Mr. 
Morgan  wanted  to  bring  about  above  all 
things  else — he  wanted  peace  and  square 
dealing  between  the  heads  of  the  railroads. 
He  wanted  peace  and  square  dealing  and 
observance  of  law  and  custom  among  them, 
because  the  opposites  of  these  things  spelled 
ruin  for  the  roads.  But  at  that  time  he  had 
little  power  to  enforce  his  ideas;  his  arm 
could  not  reach  out  there  beyond  the  Miss 
issippi.  Even  in  New  York,  the  Western 
railroad  men  were  not  greatly  impressed 
with  the  ideas  of  the  bankers;  and  once 
back  in  their  own  country  they  continued  to 
do  as  they  pleased.  Does  not  this  incident, 
in  connection  with  others,  indicate  very 
plainly  what  the  future  aim  of  a  man  of 
Mr.  Morgan's  type  was  bound  to  be?  If 
he  could  not  influence  men  by  talking  to 
them,  he  was  bound  to  seek  to  control  them 
by  force.  Everything  taught  him  the  need 
of  getting  control  himself  in  order  to  ac- 


144        J.  PIERPONT  MORGAN 

complish  his  ends.  We  have  seen  what 
these  ends  were. 

The  law  which  stopped  pooling  hastened 
the  growth  of  the  new  financial  feudalism,  of 
which  Mr.  Morgan  was  the  chief  exponent. 
It  was  an  inevitable  thing.  It  was  easy  to 
say  that  if  the  railroads  would  all  stop  fight 
ing  they  would  all  be  the  richer.  It  is  easy 
to  say  that  if  the  nations  of  the  world  would 
agree  to  stop  fighting  they  would  all  be  the 
richer.  But,  as  a  matter  of  fact,  in  the  then 
situation  of  the  railroad  companies  all 
would  not  have  been  richer  if  they  had 
signed,  and  patiently  adhered  to,  a  peace 
agreement.  Under  fair  conditions  and  with 
equal  rates  the  business  would  have  drifted, 
inevitably,  into  the  hands  of  the  bigger  and 
better  railroads;  the  weaker  and  poorer 
would  have  been  forced  to  the  wall.  Under 
the  illegal  pooling  agreements  they  had  re 
ceived  an  allotted  share  of  the  traffic  income, 
and  it  kept  them  alive.  Now  being  without 
any  such  protection  they  were  under  dog  and 
had  the  choice  to  fight,  steal,  or  starve. 

The  railroad  business  was  raw  and  new 
and  little  understood  then;  there  is  plenty 
of  evidence  that  it  is  not  thoroughly  under- 


FEUDAL  FINANCE  145 

stood  even  now.  At  the  period  with  wrhich 
we  are  dealing,  Mr.  Morgan  looked  its  diffi 
culties  in  the  face  and  successfully  sur 
mounted  them  after  his  own  fashion.  And 
there  began  to  take  shape  in  the  public  mind 
a  certain  conception  of  him,  as  a  man  of 
stone,  ruthless  but  magnanimous,  gifted 
with  a  terrible  energy,  a  terrible  force 
of  character;  as  a  man  who  could  plan  cer 
tainties,  and  as  a  man  whose  honesty  in  his 
relations  to  his  clients  was  proven  and  abso 
lute.  At  the  age  of  fifty,  Mr.  Morgan  was 
becoming  a  national  figure;  his  actions  be 
came  of  national  importance,  for  by  their 
very  size  and  scope  they  included  questions 
political  as  well  as  financial,  and  provoked 
controversies  and  movements  which  still  oc 
cupy  us  to-day. 


CHAPTER  VIII 

THE  TREASURY  CRISIS  OF  1895 

MR.  MORGAN'S  contract  to  furnish 
the  U.  S.  Government  with  gold  in 
the  year  1895  made  his  name  known 
throughout  the  country.  Up  to  that  time 
he  was  known  only  to  a  comparatively  small 
circle  of  powerful  men,  to  investors  by  repu 
tation,  and  the  newspapers  had  not  discov 
ered  him. 

In  the  winter  of  1894-95  the  United  States 
Treasury,  being  swept  by  the  tail  of  the 
calamitous  panic  of  '93,  fell  into  extreme 
difficulties.  An  extraordinary  and  unman 
ageable  set  of  circumstances,  in  which  poli 
tics  and  business  were  tightly  intertwined, 
resulted  in  the  steady  withdrawal  of  gold 
from  the  Treasury  for  more  than  a  year,  un 
til,  unquestionably,  we  faced  a  suspension 
of  specie  payments.  In  other  words,  the 
work  of  Resumption — the  hard  won  restora 
tion  of  credit  plunged  deep  at  the  time  of 

146 


TREASURY  CRISIS  OF  1895     147 

the  Civil  War — was  about  to  be  miserably 
undone. 

A  visible  peril  this  was  not,  save  to  com 
paratively  few.  Mr.  Morgan,  August  Bel- 
mont  and  a  few  other  bankers  on  the  one 
hand  saw  it  coming;  and  President  Cleve 
land  and  the  Treasury  officials  on  the  other 
engaged  in  a  continuous  struggle,  both  to 
keep  the  Treasury  from  running  completely 
out  of  gold  and  to  prevent  the  public  from 
finding  out  the  actual  state  of  affairs. 
These  insiders  were  convinced  that  if  the 
situation  became  generally  known  the  black 
est  kind  of  a  panic  would  follow. 

It  will  be  recalled  that  Mr.  Morgan  per 
sonally  managed  and  accomplished  the  res 
cue  of  the  Government  from  its  dangerous 
plight  and  that  President  Cleveland  con 
tracted  with  him  in  secret  to  do  this  deed, 
and  that  both  men  were  afterward  de 
nounced  by  the  radical  press,  the  one  as  a 
traitor  to  his  office  of  trust,  and  the  other  as 
the  unconscionable  driver  of  a  hard  bargain. 
Why  these  harsh  words?  Because,  to  put 
the  matter  of  this  criticism  at  its  best  and 
sincerest  (at  its  worst  it  was  envy  and  mal 
ice),  the  people  felt  that  in  a  self-governing 


\ 


148        J.  PIEKPONT  MORGAN 

democracy  another  way  should  have  been 
found. 

The  people  were  right,  but  wholly 
unreasonable.  A  well-governed  country 
should  not  have  permitted  its  national 
treasury  to  drift  so  near  the  rocks.  What 
ever  was  done  was  done  in  an  emergency, 
as  will  soon  appear.  The  emergency  was 
dire  and  it  was  a  dramatic  one,  although 
unclear  to  the  casual  eye,  because  of  the  con 
fused  and  technical  conditions  creating  it. 
And  throughout,  Mr.  Morgan's  personal 
characteristics  and  position,  his  peculiar 
power,  appear  in  rugged  relief.  It  was  a 
sudden  revelation  of  his  personal  force;  as 
it  was,  in  another  way,  a  revelation  of  the 
strong  character  of  Grover  Cleveland. 

Let  us  come  as  near  to  the  truth  of  these 
matters  as  we  can.  In  order  to  represent 
clearly  the  nature  of  the  bargain  President 
Cleveland  made  with  him,  and,  for  Mr.  Mor 
gan 's  part,  the  nature  of  the  undertaking 
he  proposed,  it  will  be  necessary  to  look 
somewhat  deeply,  and  with  a  little  patience, 
into  the  necessities  and  perplexities  of  the 
case. 

There  were  in  1895,  as  now,  no  less  than 


TEEASURY  CRISIS  OF  1895     149 

eight  kinds  of  money  in  use  throughout  the 
country :  gold  certificates,  silver  certificates, 
United  States  notes,  Treasury  notes,  Nat 
ional  Bank  notes,  gold  coin,  silver  coin,  and 
the  little  token  coins  of  nickel  and  bronze. 
All  looked  to  gold  for  their  value,  except,  of 
course,  the  gold  coin  itself;  but  all  did  not 
obtain  their  value  on  the  same  basis,  or  by 
the  same  route.  A  gold  certificate,  for  in 
stance,  represented  an  equal  amount  of  gold 
that  was  held  in  the  Government  vault,  the 
paper  being  used  simply  for  greater  con 
venience.  But  a  United  States  note,  which 
is  the  typical  form  of  Government  paper 
money,  was  based,  not  upon  actual  gold,  but 
upon  the  Government's  implied  promise  to 
redeem  it  in  coin  if  presented  at  the  Treas 
ury.  When  the  first  issue  of  these  United 
States  notes  or  greenbacks  was  made  in 
1862,  there  was  no  attempt  to  treat  them  as 
redeemable  in  this  fashion.  Their  value  fell 
greatly  in  gold  during  the  Civil  War,  but 
began  to  rise  after  the  war  ended,  as  soon  as 
steps  were  taken  to  accumulate  a  fund  of 
gold  for  their  redemption.  On  January  1, 
1879,  specie  payment  was  resumed,  and  these 
slips  of  Government  paper  became,  for  the 


150        J.  PIERPONT  MORGAN 

first  time  in  their  existence,   as  good  as 
gold. 

Technically  they  were  payable  in  "coin," 
which  meant  either  gold  or  silver.  At  that 
time  no  one  foresaw  that  silver  was  destined 
to  fall  off  steadily  in  value  during  the  next 
decade — that  it  was  going  to  take  a  greater 
and  greater  amount  of  silver  to  be  worth  a 
given  quantity  of  gold.  At  that  time  there 
was  no  suspended  menace  in  the  unspecific 
word  ' '  coin. ' '  Therefore,  uncomplicated  by 
the  coming  silver  question,  the  dreaded  or 
deal  of  redemption  was  passed  with  ease. 
Against  about  three  hundred  and  fifty  mil 
lions  of  its  greenback  notes  the  Govern 
ment  collected  a  gold  reserve  of  one  hun 
dred  and  fifty  millions,  of  which  half  the 
amount  was  sufficient  to  meet  all  demands. 

It  now  became  a  matter  of  administration 
policy  to  maintain  against  these  notes  a 
gold  reserve  of  a  hundred  millions.  It  was 
never  expected  that  the  notes  would  be  pre 
sented  at  the  Treasury  for  any  purpose  ex 
cept  to  obtain  gold  for  the  use  of  the  banks, 
or  for  shipment  abroad.  The  hundred-mil 
lion-dollar  fund  looked  doubly,  trebly  suf 
ficient  for  such  needs. 


TREASURY  CRISIS  OF  1895     151 

But  there  had  been  a  curious  little  pro 
vision  in  the  legislation  of  1878  relating  to 
the  currency,  which  proved  to  be  the  tiny 
cause  of  a  great  effect  in  the  year  1895. 
Congress,  fearing  that  the  retirement  of 
notes  by  redemption  in  gold  might  leave 
too  little  money  in  the  country,  shoved  in 
among  other  provisions  the  direction  that 
the  Secretary  of  the  Treasury  should  pay 
out  and  reissue  all  of  these  notes  that  were 
received.  This  meant  that  the  same  note 
could  be  used  to  obtain  its  face  value  in 
gold  at  the  Treasury  an  unlimited  number 
of  times;  it  could  be  used  like  a  ladle  to 
empty  the  Treasury  of  its  gold.  It  was  an 
unconscious  joker  in  the  law,  perhaps  im 
possible  of  detection — then. 

The  next  ten  years  wrere  not  lean  years. 
On  the  contrary,  they  were  years  of  glow 
ing  prosperity,  as  everyone  knows ;  the  quiet 
but  triumphant  resumption  of  specie  pay 
ment  was  like  the  completion  of  a  dam, 
which  made  possible  a  new  and  steady  flow 
of  capital,  energy,  ideas,  and  faith  in  the 
material  future  of  the  country.  Especially 
from  abroad  the  stream  poured  in.  It 
should  be  remembered  that  European  in- 


152        J.  PIERPONT  MORGAN 

vestors  would  not  touch  our  bonds  during 
the  Civil  War;  they  did  not  think  the  Re 
public  could  be  depended  upon.  Now, 
however,  the  business  elation  over  here  at 
tracted  their  funds  in  great  quantity,  in  too 
great  quantities,  as  it  proved. 
^  For  the  effect  was  to  speed  up  Amer- 

'.y  \  ican  business  beyond  what  was  natural  and 
i  necessary.  Where  one  factory  or  one  rail 
road  in  a  section  had  done  well,  two  or 
three  found  it  possible  to  live  only  by  prey 
ing  on  each  other.  And,  all  the  while,  the 
liquid  money  arrived  and  sought  its  use  in 
building  more  factories,  more  railroads. 
The  bursting  point  was  reached.  Then, 
suddenly  the  backward  swing  of  the  pendu 
lum  of  business  turned  the  hot  eagerness 
of  the  investing  public  into  stony  dread. 
All  but  the  wisest  saw  black,  and  by  their 
blind,  frightened  actions  created  the  very 
conditions  that  in  imagination  they  foresaw 
— which  is  the  way  a  panic  is  made.  This 
was  the  terrible  panic  of  1893. 

Meanwhile  Congress  had  discovered  the 
silver  question.  Under  the  Bland- Allison 
act  a  limited  amount  of  silver  bullion  was 


TREASURY  CRISIS  OF  1895     153 

coined  into  silver  dollars.  In  1890  Con 
gress  sought  to  make  the  coinage  free  and 
unlimited,  and  the  agitation  finally  resulted 
in  the  Sherman  Compromise  bill,  directing 
the  Secretary  of  the  Treasury  to  buy  four 
and  a  half  million  ounces  of  silver  a  month 
and  to  issue  Treasury  notes,  which  the  Sec 
retary  was  to  redeem  in  gold  or  silver  at 
his  discretion.  The  working  of  this  law 
proved  disastrous ;  silver  became  too  plenti-f 
ful,  and  hence  undesirable,  and  the  moneyl 
sharps  began  to  find  a  profit  in  exchanging 
the  poorer  metal  for  the  better  one?  and 
sending  the  gold  abroad.  Within  three 
years,  before  the  law  was  repealed  the 
Treasury  lost  nearly  one  hundred  and  fifty 
millions  of  gold.  The  Sherman  law  was  re 
pealed  in  June,  1893,  but  not  soon  enough 
to  prevent  invested  capital  from  taking 
fright.  The  capitalists  feared  they  might 
be  forced  to  take  back  in  silver  what  they 
had  put  in  in  gold.  The  sentiment  in  Con 
gress  favoring  the  violent  assumption  that 
one  metal  was  worth,  relatively,  as  much  as 
the  other,  and  that  our  debts  could  be  paid 
in  either,  gave  solid  ground  for  this  scare. 


154        J.  PIERPONT  MORGAN 

Behind  this  sentiment  was  working  the 
powerful  struggle  of  the  silver  producing 
States  to  boost  their  interest. 

Out  West  everyone  was  reading  " Coin's 
School  of  Finance/'  by  Harvey,  the  book 
which  taught  in  schoolmaster  fashion  the 
iniquity  of  the  gold  dollar,  or  they  were 
studying  woodcut  cartoons  in  which  the 
farmers  of  the  country  were  represented 
by  a  cow  and  Wall  Street  as  the  assiduous 
milkman,  pinching  the  last  drop  from  the 
faithful  beast.  You  saw  people  reading  the 
book  on  trains,  everywhere,  and  heard  them 
cursing  the  Gold  Bugs  with  heartfelt  ear 
nestness.  The  wild  dogmas  of  the  silverites 
and  the  threatening  slant  of  business  condi 
tions  made  a  deadly  combination,  a  double 
distilled  panic.  As  if  our  troubles  at  home 
were  not  enough,  the  investors  of  England 
and  Europe  asked  for  their  money  back; 
they  asked  for  it  right  away — quick !  They 
wanted  gold  while  there  was  gold  in  Amer 
ica;  and  to  gain  it  they  persistently  sold 
back  to  us  the  shares  which,  a  short  time 
before,  they  had  been  eager  to  buy. 

These  sales  built  up  a  mighty  balance 
against  us  on  the  books  of  the  bankers 


TREASURY  CRISIS  OF  1895     155 

abroad.  The  price  in  New  York  of  ex 
change  upon  London  went  higher  and 
higher.  The  effect  of  this  increasing  rate 
upon  the  Treasury  wras  technical,  but  just 
as  direct  and  vivid  as  a  slash  with  a  knife 
on  your  arm.  Foreign  exchange  is  virtually 
a  check  or  draft  sold  at  home  upon  a  banker 
in  another  country.  It  takes  the  place  of 
gold  coin,  which  is  the  only  universal 
money.  The  fact  that  the  banking  business 
acts  as  a  clearing  house  for  all  foreign  obli 
gations,  makes  it  possible  to  treat  the  com 
bined  accounts  of  one  country  with  another 
as  one  big  account.  Thus  there  is  always 
a  balance  for  or  against  the  United  States 
with  foreign  nations.  When  the  balance  is 
against  us  heavily — when,  in  other  words, 
there  is  nothing  to  drawr  against — ,  exchange 
rises  higher  and  higher  until  gold  itself 
must  be  sent.  The  one  place  to  obtain  it  is, 
arid,  of  course,  then  was,  from  the  Treasury. 
Without  hurry  or  precipitation,  but  by 
slow,  sure  steps  of  gradual  decrease,  the 
Government's  gold  disappeared.  Some  was 
sent  out  of  the  country,  some  was  hoarded 
in  the  country  by  frightened  banks  or  de 
termined  speculators.  Twice  Congress  bor- 


156        J.  PIERPONT  MORGAN 

rowed  fifty  millions  to  replenish  the  reserve, 
but  this  only  seemed  to  draw  attention  to 
the  weak  spot.  Mere  borrowing  did  no 
good.  Buyers  of  Government  bonds  simply 
borrowed  the  gold  temporarily  to  pay  for 
the  bonds,  then  exchanged  the  bonds  for 
Government  notes ;  then,  taking  these  notes 
to  the  Treasury,  exchanged  them  for  gold. 
Toward  the  middle  of  January,  1895,  the 
gold  reserve  began  to  melt  away  much  more 
rapidly.  The  panic  spread  to  the  New 
York  banks  and  their  country  customers, 
and  soon  it  was  clear  that  most  of  the  finan 
cial  forces  of  the  country  had  joined  in  a 
rash,  unprecedented  run  upon  the  United 
State  Treasury,  which  was  becoming  as 
empty  as  a  hollow  log. 

Between  December  1,  '94,  and  February 
13,  '95,  about  eighty  millions  were  drawn 
out.  The  last  week  in  January  saw  the 
reserve  drawn  down  close  to  forty  millions. 
At  the  rate  which  withdrawals  had  now 
reached,  that  of  several  millions  a  day,  there 
was  not  a  week's  supply  left.  Indeed,  there 
was  not  even  this  much,  as  a  matter  of  fact, 
for  all  but  about  three  millions  of  this  total 
was  not  in  coined  gold  but  in  gold  bars,  and 


TREASURY  CRISIS  OP  1895     157 

the  demand  was  then  specifically  for  coin, 
and  the  bars  were  at  a  discount.  The  bars 
could  not  be  substituted,  for  the  reason  that 
this  would  betray  the  real  weakness  of  the 
Treasury — which  was  kept  a  close  secret. 
To  publish  the  truth  at  this  moment  would 
have  resulted  in  turning  the  panic  into  an 
immediate  overwhelming  disaster.  From 
Chicago,  San  Francisco,  New  Orleans,  the 
Treasury  gathered  up  its  last  available  sup 
plies.  But  both  the  time  and  the  means 
were  lacking  to  block  the  inevitable  climax. 
A  more  tormenting  situation  has  seldom 
been  prepared  for  an  honest  and  responsible 
executive.  It  could  not  be  laid  bare  to  the 
public,  yet  that  wras  the  very  step  the  Presi 
dent  was  most  anxious  to  take.  Cleveland 
had  no  impression  but  one,  and  that  was 
what  arose  from  the  nature  of  the  great  of 
fice  he  held,  the  impression  that  relief  should 
come  directly  from  Congress  and  the  people. 
He  was  not  a  financier.  The  abstruse  and 
technical  factors  which  had  all  the  while 
combined  to  undermine  the  position  of  the 
Treasury — the  high  price  of  exchange,  the 
mystifying  disappearance  of  gold,  the  slow 
and  cumulative  weakening  of  the  national 


158        J.  PIERPONT  MOEGAN 

credit,  the  removal  of  the  normal  props  of 
the  currency — these  were  matters  as  puz 
zling  to  his  mind  as  to  the  majority  of  citi 
zens  who  are  not  professional  bankers.  But 
he  felt  that  Congress  could  and  should  vote 
the  bonds  which  would  provide  some  relief, 
if  only  a  temporary  relief.  On  the  twenty- 
eighth  of  January  Congress  received  an 
urgent  special  message  from  the  President, 
in  which,  among  other  things,  he  said: 

The  real  trouble  which  confronts  us  is  the  lack  of 
confidence,  widespread  and  constantly  increasing,  in 
the  continuing  ability  of  the  Government  to  pay  its 
obligations  in  gold. 

The  only  way  left  open  to  the  Government  for  pro 
curing  gold  is  by  the  issue  and  sale  of  its  bonds.  The 
only  bonds  that  can  be  so  issued  were  authorized 
nearly  twenty-five  years  ago  .  .  .  they  are  made 
payable  in  coin  instead  of  specifically  in  gold.  .  .  . 
It  is  by  no  means  certain  that  bonds  of  this  descrip 
tion  can  much  longer  be  disposed  of  at  a  price  cred 
itable  to  the  financial  character  of  our  Government. 

The  most  dangerous  and  irritating  feature  of  the 
situation  ...  is  found  in  the  means  by  which 
the  Treasury  is  despoiled  of  the  gold  thus  obtained 
without  cancelling  a  single  Government  obligation, 
and  solely  for  the  benefit  of  those  who  find  profit  in 
shipping  it  abroad  or  whose  fears  induce  them  to 
hoard  it  at  home.  .  .  .  The  same  notes  may  do 
duty  many  times  in  drawing  gold  from  the  Treasury ; 
nor  can  the  process  be  arrested  as  long  as  private 


TREASURY  CRISIS  OF  1895     159 

parties    ...     see  an  advantage  in  repeating  the 
operation. 

Whatever  ideas  may  be  insisted  upon  as  to  silver 
or  bimetalism,  a  proper  solution  of  the  question  now 
pressing  upon  us  only  requires  a  recognition  of  gold 
as  well  as  silver,  and  a  concession  of  its  importance, 
rightfully  or  wrongfully  acquired,  as  a  basis  of  na 
tional  credit,  a  necessity  in  the  honourable  discharge 
of  our  obligations  payable  in  gold,  and  a  badge  of 
solvency. 

From  Congress,  in  response  to  this  well- 
considered  and  expressive  demand,  came 
nothing  but  the  tom-tom  clash  of  the  polit 
ical  antagonisms  of  the  hour — and  set 
resistance.  Congress  never  more  clearly 
represented  a  boy's  idea  of  a  town  meeting 
than  at  that  moment.  Words,  without  ac 
tion,  smoke,  without  fire.  The  silver  agita 
tion  set  off  on  a  fresh  flight,  the  silver  men 
dogmatically  toiling  to  prove  the  gold  bugs 
usurers,  while  there  was  yet  time,  the  gold 
men  directing  their  arguments  point-blank 
at  the  bend  sinister  in  their  opponents'  doc 
trine;  they  fought  among  themselves,  not 
even  regarding  party,  forever  twisting  and 
untwisting  the  same  rope. 

"The  President  has  declared  war  on 
silver,"  said  Senator  Vest  dramatically. 


160        J.  PIERPONT  MORGAN 

"He  would  make  us  accessories  to  this  ef 
fort  to  fix  the  gold  standard  upon  us."  The 
Senator  asked  if  any  man  believed  the  "sup 
posed  emergency"  could  not  readily  be  met 
by  Treasury  payments  in  silver.  "So  far 
as  I  am  concerned,"  said  Vest,  raising  his 
right  hand  high  in  emphasis,  "I  will  never 
vote  to  issue  bonds  to  secure  gold  to  place 
us  on  a  single  gold  standard!" 

The  answer  of  the  National  Legislature  to 
the  President's  honest  and  direct  appeal 
was :  ' '  Gold  is  a  badge  of  oppression. ' ' 

The  feeling  spread  rapidly  in  England 
and  Europe  that  our  case  was  hopeless. 

Thus  the  misfortunes  of  the  Treasury 
settled  down  heavily  and  finally  upon  the 
head  of  the  President ;  upon  his  head  alone. 

Meantime,  however,  there  had  been  a 
succession  of  moves  and  countermoves  be 
tween  the  Treasury  officials  at  Washington 
and  certain  bankers  in  New  York.  Mr. 
Cleveland  had  nothing  to  do  with  all  this; 
he  depended  upon  Congress.  Theoretically, 
the  officers  of  the  Treasury  depended  upon 
Congress,  too.  That  is  to  say  the  red  tape 
in  which  they  were  tightly  wound  prevented 
them  from  openly  beginning  negotiations 


TREASURY  CRISIS  OF  1895     161 

with  a  private  source.  They  were  in  the 
position  of  a  man  who  should  be  forbidden 
to  put  out  a  fire  in  his  own  house  before  the 
city  department  arrived.  He  must  see  it 
slowly  burning,  and  surely  spreading,  and 
yet  not  raise  a  hand.  If  we  suppose  in  this 
case  that  the  man  knows  to  a  practical  cer 
tainty  that  the  official,  red-painted  appara 
tus  will  not  come  in  time  to  save  his  house 
from  destruction,  then  we  have  a  parallel. 
The  officers  of  the  Treasury  knew  that  Con 
gress  could  not  be  relied  upon  to  save  the 
Administration,  and,  using  intense  secrecy, 
they  began  to  prepare  to  save  it  themselves. 
It  was  a  visit  from  August  Belmont  which 
set  the  wheels  within  wheels  in  motion. 

On  January  24  Belmont  went  to  Wash 
ington  on  the  night  train,  and  the  next 
morning  called  upon  Secretary  Carlisle,  at 
his  office  in  the  Treasury  building.  He  de 
scribed  to  the  Secretary,  with  phrases 
clothed  in  black,  the  very  serious  financial 
situation  in  New  York.  He  seemed  greatly 
distressed,  as  indeed  he  genuinely  was,  and 
added  that  nothing  could  forestall  a  terrible 
crisis  except  the  sale  of  Government  bonds 
in  Europe.  Mr.  Carlisle,  who  was  more  a 


162        J.  PIERPONT  MORGAN 

politician  than  a  financier,  privately  thought 
that  a  sale  of  bonds  at  home  would  answer 
the  purpose;  without  saying  so,  however, 
he  begged  Mr.  Belmont  to  sound  out  the 
European  market  and  let  him  know  the  re 
sult.  A  few  days  later,  he  sent  the  Assistant 
Secretary,  William  E.  Curtis,  to  see  Mr. 
Belmont  in  New  York.  To  Curtis  had  al 
ways  been  entrusted  such  confidential  mis 
sions;  many  times  in  the  year  past  he  had 
jumped  on  a  train  and  gone  straight  to  the 
private  offices  of  New  York  bank  presidents 
to  learn  something  of  importance  to  the 
Treasury,  or,  more  often,  to  level  at  them 
some  reproaches  for  their  lukewarm  support 
of  the  Treasury  in  these  trying  times.  But 
this  was  a  more  pregnant  business,  for  when 
he  parted  from  Mr.  Carlisle  the  latter  said : 
"I  have  no  instructions  to  give  you.  You 
know  the  situation.  Do  your  best."  The 
newspapers,  which  knew  little,  but  sus 
pected  much,  had  their  reporters  trailing 
the  Assistant  Secretary  from  the  time  he 
stepped  off  the  train;  when  he  found  him 
self  in  Mr.  Belmont 's  library,  he  felt  meas 
urably  relieved. 

The  banker  laid  open  his  private  cables, 


TEEASURY  CRISIS  OF  1895     163 

and  there  was  nothing  good  in  them — 
nothing  which,  by  any  stretch,  could  be 
called  good  news  when  the  attitude  of  Con 
gress  was  recalled.  No  "coin"  bonds  were 
wanted — no  courtesies  extended  to  silver, 
positively  not.  An  out-and-out  gold  bond 
would  be  considered  by  the  foreign  bankers ; 
but  a  majority  of  Congress  wouldn't  con 
sider  that.  Mr.  Belmont's  correspondents 
were  the  Rothschilds,  caliphs  of  money  and 
credit  across  the  sea.  Nothing,  in  that  di 
rection,  could  be  done  without  their  help. 
Mr.  Belmont  was  gloomier  of  aspect  than 
before;  in  place  of  his  own  judgment,  he 
now  had  positive  information  of  the  black 
ness  of  the  prospect.  He  advised  Curtis  to 
see  Mr.  Morgan  in  the  morning,  and  the 
Secretary  left,  promising  to  do  so. 

Up  to  this  morning — the  thirtieth  of 
January — Mr.  Morgan  had  made  no  move. 
In  the  Street  his  attitude  was  a  mystery; 
whenever  the  subject  of  gold  shipments  was 
mentioned  a  question  was  invariably  asked, 
which  no  one  could  answer :  "  What  is  Mor 
gan  doing?"  But  this  morning  he  received 
two  communications,  one  a  note  from  Curtis 
asking  him  to  come  to  the  sub-Treasury  for 


i 


164        J.  PIERPONT  MORGAN 

a  meeting,  and  the  other  a  cable  from  his 
firm  in  London,  stating  that  the  Rothschilds 
had  called  upon  them  and  made  the  sugges 
tion  that  the  two  firms  should  act  together  in 
conjunction  with  Mr.  Belmont  and  the  Mor 
gan  firm  in  New  York,  with  a  view  to  pre 
venting,  if  possible,  a  catastrophe.  Soon 
August  Belmont  walked  into  the  office.  He 
had  received  a  corresponding  cable.  Mr. 
Morgan  then  told  him  that  he  was  ready  to 
act  as  had  been  suggested,  and  proposed 
that  they  should  go  together  to  see  Mr. 
Curtis.  They  went. 

Curtis  stated  the  situation,  so  far  as  the 
Treasury  was  concerned,  and  said  that  the 
Government  desired  to  make  such  a  nego 
tiation  as  would  secure  the  necessary  gold 
for  the  Treasury. 

Mr.  Morgan  told  him  that  in  his  opinion 
affairs  had  gone  so  far  that  a  crisis  had  ar 
rived,  and  there  was  now  such  a  feeling  of 
anxiety  in  the  public  mind  that  it  would  be 
absolutely  impossible  to  secure  the  gold  by 
public  advertisement;  and  further,  unless 
a  negotiation  could  be  made  for  gold  on  the 
other  side,  he  thought  it  would  be  useless. 
"So  far  as  my  own  advices  are  concerned," 


TREASURY  CRISIS  OF  1895     165 

Mr.  Morgan  continued,  "I  will  frankly  say 
that  it  is  very  doubtful  whether  the  gold  can 
be  secured  in  Europe,  but  an  attempted  ne 
gotiation  is  essential." 

Curtis  asked  them  if  they  would  under 
take  it  provided  the  President  and  Secre 
tary  of  the  Treasury  requested  it.  Mr. 
Morgan  told  him  that  he  felt  bound  to  do 
so,  and  that  he  was  prepared  to  proceed 
upon  a  basis  which  he  would  set  down  dur 
ing  the  day,  and  which  Curtis  could  take 
to  Washington,  and  that  from  there  he 
could  let  them  know  whether  it  was  agree 
able  to  the  President  and  Secretary  of  the 
Treasury. 

That  memorandum  provided  for  a  pri 
vate  contract  as  essential — no  popular  loan 
under  any  circumstances.  Mr.  Curtis  went 
back  to  Washington. 

Up  to  this  time  nothing  whatever  had 
been  said  as  to  price.  Mr.  Morgan  said 
afterward:  "It  was  not  really  a  question 
of  price.  It  was  a  question  of  success." 
On  Saturday  Curtis  brought  back  a  favour 
able  answer  from  the  Secretary;  and  the 
terms  of  a  bond  issue  were  proposed  by  the 
bankers. 


166        J.  PIERPONT  MORGAN 

On  the  same  day  between  five  and  six 
millions  of  gold  were  taken  from  the  Treas 
ury  and  sent  to  the  steamers  for  shipment 
to  Europe.  There  was  less  than  a  day's 
supply  left.  But  toward  evening  a  remark 
able  thing  happened;  the  news  that  Mr. 
Morgan  had  taken  hold,  that  something 
would  be  done,  caused  a  sudden  change  of 
feeling  in  financial  circles,  and  a  large  por 
tion  of  this  gold  was  removed  from  the 
steamers  and  sent  back  to  the  Treasury. 
A  mere  rumour  accomplished  this.  But  this 
was  temporary;  Blondin  had  started  over 
Niagara  on  his  tight  rope — would  he  safely 
cross? 

The  press,  aware  that  something  extraor 
dinary  was  on  foot,  took  hold  of  the 
situation  from  the  angle  which  naturally 
presented  itself;  the  attitude  of  the  press 
was  suspicious.  This  secrecy  was  galling; 
something  was  said  about  "  dark-lantern 
financiering,"  and  it  was  asked  if  the  Presi 
dent  were  not  delivering  himself  into  the 
hands  of  the  money  interests,  to  make  a 
profit  for  them  at  the  expense  of  the  nation. 
There  was  much  talk  about  our  grand  na 
tional  resources,  and  what  the  people  would 


TREASURY  CRISIS  OF  1895     167 

do  if  Congress  gave  them  a  chance  to  come 
to  the  rescue  in  this  emergency.  The  New 
York  World  repeatedly  declared  that  the 
President  should  put  his  foot  down  for  a 
three  per  cent,  loan;  "if  the  banks  won't 
take  it,  the  people  will." 

And  Cleveland  had  more  than  a  mind  to 
put  his  foot  down;  perhaps  he  still  had 
some  faith  in  Congress.  At  any  rate,  he 
was  determined  to  depend  upon  Congress. 
Carlisle,  too,  was  somewhat  in  favour  of  a 
popular  loan.  Thus  it  came  about  that 
on  Monday  morning,  when  Mr.  Morgan 
thought  the  matter  practically  settled,  he  re 
ceived  a  letter  from  Mr.  Carlisle  informing 
him  that  the  Treasury  had  decided  to  aban 
don  the  private  negotiation  and  to  depend 
upon  Congress  for  a  popular  loan. 

It  was  a  blow.  Mr.  Morgan  was  abso 
lutely  convinced  in  his  own  mind  that  a 
popular  call  for  gold  at  this  time  would 
only  react  disastrously  upon  the  Treasury. 
Without  a  moment's  delay  the  banker  got 
into  communication  with  Mr.  Carlisle  and 
urged  him  by  no  means  to  do  anything  until 
he  and  Mr.  Belmont  arrived  in  Washing 
ton.  The  Secretary  consented  to  wait  a 


168        J.  PIERPONT  MORGAN 

day.  Mr.  Belmont  started  at  once,  on  re 
ceiving  the  news  from  Mr.  Morgan;  the 
latter  left  on  an  afternoon  train.  With  him 
went  his  junior  partner,  Robert  Bacon,  and 
his  lawyer,  Francis  Lynde  Stetson ;  Stetson, 
it  will  be  remembered  was  a  former  partner 
of  Mr.  Cleveland.  He  had  just  returned 
to  the  city  after  an  absence  of  some  days 
when  he  received  the  summons  from  Mor 
gan:  "  There  may  be  papers  to  be  drawn, 
and  I  want  you."  The  lawyer  told  Mor 
gan  that  he  felt  so  much  interest  in  the  mat 
ter  that  he  would  go  on  foot  if  necessary; 
that  he  considered  it  a  patriotic  duty. 

In    Washington,    however,    there    were 
many  and  confusing  views  of  patriotic  duty 
at   this   moment.     Senator   Vest,    for    in 
stance,  was  declaiming  dramatically  in  the 
Senate:     "The  President  has  declared  war 
upon    silver!"    Our    grand    national    re 
sources,  the  faith  of  the  people,  etc.,  were 
much  to  the  front.     Nevertheless,  in  spite  of 
1  our  grand  national  resources  and  the  loyalty 
I  of  the  people,  something  definite  must  be 
jdone  at  once  to  fill  the  empty  Treasury. 
Mr.  Cleveland  was  a  patriot,  too,  with  the 
difference  that,  in  his  breast,  theory  was  op- 


TREASURY  CRISIS  OF  1895     169 

posed  by  necessity.  He  was  determined  to 
make  the  Congress  see  its  duty,  and  to  force 
some  action.  This  was  his  duty  and  his  at 
titude. 

Tuesday  morning,  Mr.  Morgan,  and  Mr. 
Belmont,  with  Stetson  and  Secretary  Car 
lisle,  called  upon  the  President.  Mr.  Mor 
gan,  upon  this  occasion,  did  most  of  the 
talking;  he  and  Cleveland  were  old  ac 
quaintances,  having  frequently  met  when  the 
latter  was  engaged  in  law  practice  in  New 
York  after  his  first  term  at  the  White 
House.  It  had  been  Mr.  Morgan's  custom 
to  drop  in  on  the  President  for  a  pleasant 
visit  whenever  he  went  to  Washington,  and 
to  smoke  a  cigar  with  him. 

This  morning,  the  atmosphere  was  very 
different.  Between  them  existed  a  pro 
found  difference  of  opinion.  Mr.  Cleve 
land  was  not  a  man  to  be  carried  off  his 
feet  by  the  personal  force  of  another;  he 
had  made  up  his  mind  that  he  would  leave 
the  matter  to  Congress,  and  he  would  not 
change.  Mr.  Morgan,  in  his  characteristic 
ally  intense  and  rapid  manner,  outlined  the 
essential  features  of  his  own  plan,  and 
showed  the  necessity  for  each.  To  him  it 


170        J.  PIERPONT  MOBGAN 

seemed  as  clear  as  day  that  success  de 
pended  upon  selling  bonds  abroad;  in  no 
other  way  could  gold  be  got  for  the  Treas 
ury  which  would  not  come  from  the  Trea- 
ury  itself.  The  President  was  unable  to 
find  a  flaw  in  the  banker's  argument,  but  he 
was  not  convinced.  He  would  not  agree  to 
do  anything.  The  meeting  broke  up. 

A  bill  had  been  introduced  in  the  House, 
authorising  an  issue  of  veritable  gold  bonds 
—not  "coin"  bonds,  but  bonds  specifically 
payable  in  gold.  The  Springer  bill,  as  it 
was  called,  had  been  kicking  around  the 
House  for  a  long  time;  it  was  only  neces 
sary  to  mention  it  to  loosen  all  the  tongues 
of  discord  and  set  the  cloud  compelling 
orators  to  their  work;  platitudes  about  pa 
triotism,  our  great  wealth,  the  confidence  of 
the  people,  gold,  the  badge  of  infamy,  and 
the  crime  of  '73,  were  offered  by  the  demo 
cratic  majority,  but  no  action  which  would 
put  a  dollar  of  gold  where  the  Administra 
tion  needed  it.  On  Thursday  afternoon  the 
bill  was  brought  to  a  vote — and  defeated. 
In  regard  to  the  failure  of  this  bill,  the  New 
York  World,  the  newspaper  which  took  a 


TREASURY  CRISIS  OP  1895     171 

leading  part  in  agitating  the  subject,  said 
editorially : 

"The  only  thing  left  for  the  Administra 
tion  to  do  is  to  make  a  loan  on  the  best 
terms  obtainable.  That  these  terms  will  be 
harsh  and  discrediting  is  due  as  much  to  the 
wilfulness  and  imbecility  of  Congress  as  to 
the  incapacity  of  the  Administration — that 
party  leadership  which  is  a  part  of  its  obli 
gation  to  the  voters  who  placed  it  in  power." 

The  situation,  which  had  been  held  to 
gether  artificially  by  the  strength  of  a  mere 
rumour  that  a  Morgan  syndicate  was  about 
to  take  charge,  was  now  practically  without 
hope.  This  was  Thursday  afternoon,  Feb 
ruary  7.  Sometime  during  the  next  day  the 
Treasury  would  be  forced  to  suspend  pay 
ment.  Unless  a  miracle  intervened,  this 
was  a  certainty. 


CHAPTER  IX 

THE  RELIEF  OF  THE  GOVERNMENT 

rMHE  negotiations  with  Mr.  Morgan  had 
JL  been  terminated.  There  had  been  no 
request  to  him  to  return  to  Washington. 
But  he  knew,  as  almost  every  other  banker 
and  every  financier  expert  in  the  country 
knew,  and  as  they  knew  abroad,  that  a  crash 
could  only  be  a  few  hours  away.  When  the 
market  closed  and  the  withdrawals  from  the 
Treasury  were  reported  on  the  news  sheets 
he  put  on  his  coat  and  hat  and,  calling 
Bacon,  left  his  office,  passed  without  speak 
ing  through  the  knot  of  reporters  that  was 
gathered  outside.  Entering  a  cab,  he  went 
over  the  Cortlandt  Street  Ferry  and  started 
for  Washington  on  the  Congressional  Lim 
ited.  Of  course,  the  news  of  his  starting 
was  telegraphed  to  Washington.  Just  what 
his  plan  or  purpose  was,  nobody  knew,  but, 
he  has  since  expressed  it,  he  felt  that  it  was 
his  "duty  to  go  down  and  see  the  President 

172 


BELIEF  OP  THE  GOVERNMENT     173 

once  more/7  although  he  had  not  been 
bidden  to  do  so. 

When  he  got  off  the  train  in  Washing 
ton,  to  his  surprise  he  was  met  by  Daniel 
Lamont,  the  Secretary  of  War,  who  in 
formed  him  that  his  coming  to  Washing 
ton  had  been  reported  and  that  whatever 
his  errand  was  it  was  only  fair  for  him  to 
know  that  the  President  had  not  changed 
his  attitude  about  the  responsibility  of  Con 
gress  for  the  situation;  he  would  not  con 
sider  a  private  bond  sale  and  lie  would 
not  see  Mr.  Morgan.  After  Mr.  Lamont 
ceased  speaking,  Mr.  Morgan  told  him  that 
he  had  come  to  Washington  to  see  the  Presi 
dent,  that  he  was  going  to  the  Arlington 
Hotel  and  would  stay  there  until  lie  saw 
him.  Hailing  a  cab,  he  jumped  into  it  and 
drove  to  the  hotel  with  Bacon. 

The  news  of  his  arrival  was  quickly 
noised  around  and  immediately  the  Treas 
ury  officials,  leaders  in  Congress  and  others 
familiar  with  the  situation,  came  to  see  him. 
They  all  knew  the  state  of  the  Treasury, 
and  all  told  the  same  story  about  the  impos 
sibility  of  getting  any  action  up  at  the 
Capitol.  It  was  the  Silverite's  opportu- 


174        J.  PIERPONT  MOEGAN 

nity!  It  was  their  chance  to  see  gold  dis 
credited  and  (as  they  thought)  in  the  wreck 
that  would  follow,'  to  put  into  practice  their 
own  theories.  Every  caller  dilated  on  the 
perils  of  the  situation  and  unloaded  the  bur 
den  of  his  own  fears  on  Mr.  Morgan;  but 
no  one  made  any  suggestions. 

All  the  evening,  this  sort  of  reception 
went  on.  Mr.  Morgan  sat  and  listened  and 
smoked  and  said  nothing.  It  was  after  mid 
night  when  the  last  of  these  callers  left,  and 
finally  Bacon  went  to  bed,  leaving  Mr.  Mor 
gan  still  working  out  a  game  of  solitaire. 
The  people  in  the  hotel  said  later  that  his 
light  was  not  extinguished  until  after  four 
o'clock.  It  was  not  only  a  problem  involv 
ing  clubs,  spades,  and  diamonds,  that  he  was 
engaged  in — there  was  only  one  day's  sup 
ply  of  gold  left  in  the  United  States  Treas 
ury  and  a  plan  had  to  be  worked  out  to  save 
the  Nation's  credit.  The  morning  of  the 
next  day  was  not  auspicious.  The  sky  was 
dark,  and  there  was  a  big  snowstorm  blow 
ing.  While  Mr.  Morgan  and  Mr.  Bacon 
were  breakfasting  together,  about  half-past 
nine  o'clock,  the  financier  told  his  junior 
partner  of  the  plan  that  he  had  evolved  the 


EELIEF  OF  THE  GOVERNMENT     175 

night  before  over  his  game  of  solitaire.  He 
remembered  that  when  he  was  a  ;  -oung  man, 
during  the  Civil  War,  Lincoln  Lad  had  to 
face  the  crisis  of  an  empty  Treasury,  and 
that  in  the  emergency  Salmon  1 ,  Chase, 
then  Secretary  of  the  Treasury,  carue  on  to 
New  York  and  called  a  conference  of  the 
leading  bankers  to  devise  ways  and  means 
of  getting  gold  for  the  Government.  As 
a  result  of  these  conferences,  the  Secretary 
telegraphed  the  President  to  try  to  keep 
Congress  in  session  until  he  should  return, 
and  he  then  took  the  first  train  back  to 
Washington.  When  he  got  there  he  found 
that  Congress  had  already  adjourned  for 
the  day  at  the  time  his  message  was  received 
at  the  White  House,  but  the  next  morning 
President  Lincoln  submitted  the  matter  to 
the  National  Legislature  and  an  act  was 
passed  empowering  the  Secretary  of  the 
Treasury  to  purchase  gold  whenever  the 
Government  needed  it,  and  to  pay  for  it  in 
any  authorised  obligations  of  the  United 
States  Government,  at  the  best  price  that 
the  Secretary  could  make. 

Mr.  Morgan  told  Mr.  Bacon  that  as  he 
recalled  it,  this  act,  which  had  been  ap- 


176        J.  PIERPONT  MORGAN 

proved  by  Lincoln,  was  still  on  the  statute 
books,  and  that  he  had  been  familiar  with 
its  operations  in  1862  because  gold  had  been 
sold  to  the  Government  by  the  house  with 
which  he  was  then  connected.  He  thought 
the  act  was,  as  he  expressed  it,  "  Section 
number  four  thousand  and  something  of  the 
Revised  Statutes,"  and  that  if  the  act  had 
not  been  repealed  or  amended  by  one  of  the 
many  bills  passed  in  connection  with  re 
sumption,  it  might  still  be  in  effect  and 
might  prove  of  value  in  the  present  emer 
gency. 

Before  they  had  finished  their  meal,  they 
began  to  receive  reports  of  the  opening  of 
business  in  New  York  and  learned  that  the 
run  on  the  Treasury  continued.  That  same 
information  must  have  been  received  at  the 
same  time  by  Secretary  Carlisle  in  the 
Treasury  Department,  as  well  as  in  the 
White  House.  The  telephone  rang  and  Mr. 
Bacon  received  a  message  to  the  effect  that 
the  President  would  see  Mr.  Morgan.  Not 
even  stopping  to  light  his  customary  after- 
breakfast  cigar,  the  financier  started  with 
Bacon  across  Lafayette  Square,  for  the 
White  House.  Arriving  there,  they  found 


BELIEF  OF  THE  GOVERNMENT     177 

that  Secretary  Carlisle,  Attorney-General 
Olney,  and  other  members  of  the  adminis 
trative  family  had  already  joined  the  Presi 
dent. 

The  President's  greeting  was  very  short 
and  formal.  Mr.  Morgan  looked  at  him 
and  saw  that  he  was  not  smoking,  so  he  did 
not  light  his  own  cigar.  He  and  Bacon  sat 
down  at  what  was  destined  to  be  a  mem 
orable  conference.  The  Secretary  of  the 
Treasury  gave  the  latest  reports  of  the  con 
dition  of  the  Sub-Treasury  in  New  York, 
where  the  fight  was  centred.  Mr.  Cleve 
land  reiterated  his  determination  not  toj 
consent  to  a  sale  of  Government  bonds  to  a 
syndicate  of  bankers  or  otherwise.  He  dis 
cussed  the  situation  with  his  official  advisers 
while  Mr.  Morgan  and  Mr.  Bacon  sat  as 
spectators  to  the  scene.  This  discussion 
lasted  for  some  time.  Meanwhile,  there 
were  handed  to  the  Secretary  of  the  Treas 
ury  bulletins  concerning  the  situation,  which 
he  read  or  turned  over  to  the  President. 

The  minutes  grew  into  hours.  What 
was  being  told  to  the  group  in  the  White 
House  was  known  in  the  banking  world. 
Other  firms  and  individuals  might  take 


178        J.  PIERPONT  MORGAN 

steps  to  provide  against  the  apparently  in 
evitable  crash,  but  Mr.  Morgan,  with  all 
that  he  had  at  stake,  sat  quietly  and  listened. 
He  was  not  asked  to  make  any  suggestion. 
The  President  was  striving  with  his  own 
advisers  to  find  a  way  out  of  the  difficulty 
and  still  held  to  his  determination  to  do  it 
without  assistance  from  Wall  Street,  if  pos 
sible.  At  last,  however,  a  memorandum 
taken  from  a  telephone  message  showed  that 
there  were  but  nine  million  dollars  of  gold 
left  in  the  New  York  Sub-Treasury.  And, 
at  this  point,  Mr.  Morgan  broke  his  silence. 

He  said:  "Mr.  President,  the  Secretary 
of  the  Treasury  knows  of  one  check  out 
standing  for  twelve  million  dollars.  If  this 
is  presented  to-day;  it  is  all  over." 

Mr.  Carlisle  had  told  him  the  evening  be 
fore  at  the  hotel  about  this  check.  He  had 
had  it  in  his  mind  every  minute  since  that 
time.  The  Secretary  confirmed  this  state 
ment  at  once  and  the  President  then  turned 
to  Mr.  Morgan  for  the  first  time  and  said: 
"Have  you  anything  to  suggest?" 

To  this  man  who  is  accustomed  to  taking 
the  initiative  in  things,  to  saying  "do  this," 
"do  that,"  it  had  been  an  ordeal  to  sit  si- 


BELIEF  OF  THE  GOVERNMENT     179 

lent  and  inactive  that  morning  at  the  White 
House.  When  he  began  to  speak,  he  talked 
rapidly.  He  told  the  President  of  his  recol 
lection  of  that  "  Section  number  four  thou 
sand  and  something"  of  the  United  States 
Statutes.  He  explained  that  he  did  not 
know  whether  it  was  still  in  force  and  that 
he  had  not  seen  it  or  read  it  for  probably 
thirty  years,  but  that  if  it  was  still  effective, 
then  it  gave  Secretary  Carlisle  the  same 
power  that  Secretary  Chase  had  had  and 
would  prove  of  equal  benefit  to  the  Govern 
ment  in  its  present  distress. 

At  a  word  from  the  President,  Attorney- 
General  Olney  stepped  out  of  the  room  and 
in  a  moment  returned  with  the  book  of  Re 
vised  Statutes.  He  told  the  President  that 
what  Mr.  Morgan  had  said  was  perfectly 
true,  that  this  act  was  known  as  "  Section 
No.  3700,"  and  that  from  a  casual  examina 
tion  he  thought  it  was  still  in  force.  Mr. 
Cleveland  quietly  took  the  book  from  his 
hand  and  with  deep  concentration  read  the 
act  to  himself.  Here  it  is,  as  it  was  passed 
on  March  17,  1862 : 

"The  Secretary  of  the  Treasury  may 
purchase  coin  with  any  of  the  bonds  or  notes 


180        J.  PIERPONT  MORGAN 

of  the  United  States  authorised  by  law,  at 
such  rates  and  upon  such  terms  as  he  may 
deem  most  advantageous  to  the  public  in 
terest." 

Everyone  in  the  room  sat  in  the  silence  of 
deep  suspense.  When  the  President  had 
concluded  the  reading  of  the  section,  he 
laid  the  book  slowly  on  his  desk  and  then  his 
face  lighted  up  with  almost  a  smile  of  relief 
and  he  said:  "Mr.  Morgan,  I  think  the  act 
is  ample  for  our  needs  and  that  it  will  solve 
the  situation." 

The  tension  was  broken. 

In  the  rapid  fire  of  question  and  answer 
which  followed,  the  President  with  Mr. 
Morgan  became  the  centre  of  a  discussion 
with  his  official  family  as  to  the  steps  that 
should  be  taken  to  secure  the  benefit  of  the 
act.  The  Attorney-General  left  to  make 
a  further  and  fuller  report  on  the  law. 
The  President  then  took  up  with  Mr.  Mor 
gan  the  terms  under  which  he,  as  repre 
senting  a  syndicate,  would  furnish  the  gold 
the  Government  needed.  Mr.  Morgan's 
suggestion  was  that  the  Government  should 
purchase  enough  gold  to  result  in  placing 
a  hundred  million  dollars  in  the  Treasury, 


BELIEF  OF  THE  GOVERNMENT     181 

but  the  President  thought  that  it  would  be 
wiser  to  purchase  a  specific  number  of 
ounces,  and  after  consultation  with  the  Sec 
retary  of  the  Treasury  and  his  lieutenants, 
decided  upon  three  and  a  half  million  ounces. 
The  question  of  terms  and  price  then  was 
discussed  and  finally  settled  at  $17.80  per 
ounce,  which  would  result  in  placing  about 
sixty-five  millions  in  the  Treasury,  the  Sec 
retary  feeling  that  this  would  be  sufficient. 
All  had  gone  well  up  to  this  point,  when  the 
President's  face  became  very  grave.  He 
said: 

"How  about  this  drain  of  gold  abroad? 
Suppose  the  Government  does  purchase 
this  gold  from  the  bankers  and  it  is  im 
mediately  withdrawn  from  the  Treasury 
and  sent  abroad.  Can  you  guarantee  that 
such  a  thing  will  not  happen'?" 

There  was  no  time  for  Mr.  Morgan  to 
consult  with  any  members  of  his  proposed 
syndicate.  It  was  evident  from  the  Presi 
dent's  tone  that  he  considered  some  such 
guaranty  essential  to  the  success  of  the  plan. 
Could  Mr.  Morgan  stop  the  foreign  ex 
change  houses  from  taking  their  profit  by 
exporting  gold?  He,  and  he  alone,  had  to 


182        J.  PIERPONT  MOKGAN 

decide  that  question  then  and  there,  and 
without  a  moment's  hesitation  he  said: 
"Mr.  President,  I  will  so  guarantee." 
"All  right,"  said  the  President    "It  is 
now  two  o'clock,  and  you  gentlemen  had 
better  all  go  out  and  get  some  lunch,  while 
I  formulate  the  terms  of  the  plan  for  trans 
mission  in  a  message  to  Congress  so  as  to 
send  it  up  to  the  Capitol  without  delay." 

As  all  rose  from  their  seats,  someone 
said:  "Mr.  Morgan,  what  is  that  brown 
powder  on  your  trousers  and  clothes  and 
all  around  your  chair?"  He  looked  down 
quickly.  It  was  his  after-breakfast  cigar 
that  he  had  been  holding  in  his  hand  un- 
lighted  as  he  entered  the  room  and  which, 
as  he  had  sat  there,  he  had  unconsciously 
ground  to  pieces.  The  President  laughed, 
and  reaching  for  a  box  of  cigars,  told  Mr. 
Morgan  that  it  was  time  for  him  to  have  a 
smoke  and  added  that  he  wished  Mr.  Mor 
gan  would  remain  while  he  dictated  the  spe 
cial  message  in  order  to  see  if  it  incorpo 
rated  all  the  details  of  the  plan.  The  others 
left  and  Mr.  Cleveland  summoned  his  secre 
tary  and  dictated  the  message  which  was 
sent  to  the  Capitol  that  afternoon. 


BELIEF  OP  THE  GOVEBNMENT     183 

In  the  contract  it  was  arranged  for  the 
Government  to  pay  for  this  gold  in  four 
per  cent,  bonds;  not  gold  bonds,  but  " paya 
ble  in  coin  of  the  standard  value."  By  this 
transaction  the  Government  would  receive 
gold  worth  $65,317,500  and  would  issue 
in  payment  $62,317,500  worth  of  bonds, 
the  difference  in  the  amounts  representing 
the  premium  on  the  bonds.  As  these  were 
to  run  thirty  years,  this  premium  would 
make  the  price  equal  to  104.49  and  the  rate 
of  interest  three  and  three-fourths  per  cent. 

Mr.  Cleveland,  in  his  message,  pointed 
out  that  the  situation  had  rendered  immedi 
ate  executive  action  a  necessity.  After  out 
lining  the  contract  made,  he  pointed  mark 
edly  to  one  of  its  provisions,  in  which  the 
Government  was  given  the  privilege  of 
substituting  within  ten  days  straight  three 
per  cent,  gold  bonds  at  par,  "if  the  same 
shall  be  authorised  by  Congress,"  in  place  of 
the  four  per  cents,  payable  in  coin,  payable, 
that  is  to  say,  either  in  gold  or  silver.  Ac 
tion  by  Congress  on  this  provision  would 
save  the  country  more  than  sixteen  millions 
in  interest  money.  The  President  urged 
Congress  to  take  advantage  of  the  offer  thus 


184        J.  PIERPONT  MORGAN 

simply  and  flatly  laid  before  it.  But  the 
majority  in  Congress  considered  the  distinc 
tion  made  by  the  bankers  between  coin  and 
gold  as  abitrary,  invidious;  they  flouted  it, 
in  the  name  of  silver,  and  cast  away  the 
sixteen  millions. 

If  Mr.  Cleveland  had  been  the  obstinate 
man  that  some  of  his  critics  depict  him, 
he  would  have  refused  to  accept  relief 
from  any  source  except  Congress,  upon 
which  he  had  rightly  placed  the  responsi 
bility  for  the  situation.  If  he  had  been  a 
timorous  man,  he  would  have  shrunk  from 
the  certainty  of  criticism  of  a  plan  which, 
although  it  was  not  a  bond  sale  to  a  syn 
dicate  or  to  private  parties,  in  effect  put  a 
large  issue  of  Government  obligations  in 
the  hands  of  bankers  in  return  for  gold. 
Being  a  trained  lawyer,  he  recognized  that 
Mr.  Morgan's  plan  was  no  new  idea.  It 
was  merely  relying  on  a  statute  of  the 
United  States  which  had  stood  the  test  of 
experience  and  which  had  been  adopted  for 
the  purpose  of  serving  the  Government  in 
just  such  a  crisis  as  had  arisen.  In  this  de 
termination  to  put  the  responsibility  on 
Congress  so  long  as  there  was  a  dollar  in 


EELIEF  OP  THE  GOVERNMENT     185 

the  Treasury,  lie  was  steadfast.  In  his  pa 
tient  consideration  of  the  situation  with  his 
official  advisers  before  seeking  outside  aid, 
he  showed  himself  to  be  the  strong  man, 
the  painstaking  executive,  that  his  public 
career  has  amply  proved  him  to  have  been. 

His  proverbial  stubbornness  was  shown 
in  the  way  in  which  he  met  the  unfair  at 
tacks  of  his  political  foes  and  the  spiteful 
charges  of  the  disappointed  Silverites. 

The  gist  of  the  special  message  was  in  the 
late  news  of  the  evening  papers.  It  was 
known  broadcast  that  Mr.  Morgan  was  at 
the  White  House.  That  was  Friday  even 
ing.  The  Trans- Atlantic  liners  were  to  sail 
the  next  day,  and,  that  night,  eighteen  mil 
lions  in  gold,  which  had  been  put  on  board 
for  shipment,  was  taken  out  of  the  strong 
boxes  of  the  ships  and  guarded  until  the  next 
morning,  when  it  was  brought  back  and  de 
posited  in  the  Sub-Treasury  in  Wall  Street. 

The  Government  had  done  its  part  and 
Mr.  Morgan  returned  at  once  to  New 
York  to  take  up  the  important  task  of  stop 
ping  the  outflow  of  gold.  His  plan  was  to 
offer  the  men  who  were  shipping  the  gold 
an  equal  or  a  better  profit  by  refraining 


186        J.  PIERPONT  MOEGAN 

jfrom  shipments  and  participating  in  the 
f  bond  issue.  The  preliminary  agreement 
which  he  signed  in  Washington,  and  which 
was  afterward  signed  by  Mr.  Belmont, 
who  had  been  delayed  in  getting  there  on 
account  of  the  snowstorm,  provided  for  a 
syndicate  of  which  Morgan  and  Belmont 
were  managers,  to  take  the  bonds  and  fur 
nish  the  gold.  Gold  shipments  dropped 
immediately  from  several  millions  a  day  to 
.  thirty  or  forty  thousand.  The  emergency 
had  been  met  and  the  credit  of  the  country 
saved. 

The  danger,  however,  was  no  sooner 
passed  than  violent  criticism  broke  out 
against  the  means  by  which  relief  had  been 
obtained.  It  was  said  that  the  gold  pur 
chase  contract  was  the  hardest  kind  of 
"squeeze."  The  secrecy  surrounding  the 
whole  affair  inflamed  suspicion.  The  im 
mediate  rise  in  value  of  the  bonds  issued  to 
pay  for  the  gold  seemed  to  justify  some  of 
the  assertions  that  were  made.  If  these 
critics  were  right  in  the  broad  sense  that  a 
negotiation  of  this  sort  between  a  great  gov 
ernment  and  private  bankers  was  an  unideal 
thing,  they  were  wrong  in  attacking  the 


BELIEF  OP  THE  GOVERNMENT     187 

motives  and  purpose  of  the  men  immediately 
concerned.  When  they  ignored  the  fact 
that  in  giving  his  guarantee  to  stop  the 
drain,  Mr.  Morgan  risked  the  resources  not 
only  of  himself,  his  friends,  but  also  of  his 
financial  allies,  they  were  unfair.  When 
they  ignored,  with  their  suggestions  of  what 
might  have  been  done,  the  actual  stubborn 
difficulties  of  the  real  situation,  they  were 
talking  in  the  air. 

At  bottom,  the  contract  amounted  to 
this:  The  Government  took  a  partner 
who  agreed  to  furnish  it  with  gold,  not 
its  own  gold  juggled  from  the  Treasury,  but 
other  gold ;  and  who  agreed  to  put  an  end  to 
the  unnatural  run  upon  the  Treasury.  In 
return  for  these  services,  both  unusual  and 

• 

without  precedent,  the  Government  agreed) 
upon  a  rate  of  interest  unusually  high.     It'1 
was  in  this  comparatively  high  rate  of  in-< 
terest  that  Morgan,  as  manager  of  the  busi-  • 
ness,  found,  not  so  much  his  own  profit,  as  \ 
the  leverage  which  was  to  enable  him  to  con-  , 
trol   the   situation.     Very   soon   after   the 
signing  of  the   contract   a   syndicate   was 
formed  to  take  up  the  bonds;  Morgan  and 
Belmont  constituted  themselves  managers, 


188        J.  PIERPONT  MORGAN 

and  they  put  down  on  the  list  the  names  of 
such  banks  and  bankers,  dealers  in  ex 
change,  and  even  bullion  houses,  as  they 
thought  would  make  the  strongest  combina 
tion.  The  object  of  the  managers  was  to 
draw  a  close  circle  around  the  National 
Treasury,  and  by  controlling  the  price  of 
exchange,  prevent  any  further  raids  upon 
the  reserve.  All  of  the  subscribers  came  in 
under  an  agreement  to  furnish  gold  equal 
to  the  price  of  their  bonds,  and  under  the 
specific  agreement  not  to  obtain  any  of  it 
from  the  United  States  Treasury.  The 
bonds  were  allotted  to  the  members  of  the 
syndicate  at  the  Government's  price  and 
were  offered  to  the  public  at  112  and  a  frac 
tion.  The  managers  disposed  of  one  half 
the  entire  issue  in  America  on  these  terms, 
the  other  half  being  placed  in  Europe  on 
terms  not  quite  so  good.  As  the  bonds  aft 
erward  rose  in  value  to  120  the  syndicate 
managers  were  in  the  position  of  having 
made  money  for  all  the  subscribers.  This 
insured  the  success  of  their  campaign,  and 
as  the  bonds  were  not  all  issued  at  once,  but 
from  time  to  time,  as  fast  as  the  gold  was 
needed,  by  the  Treasury,  the  managers  re- 


RELIEF  OF  THE  GOVERNMENT    189 

mained  in  the  strong  position  of  having  val 
uable  favours  to  dispense  to  any  houses 
which  proved  hostile  and  attempted  to  work 
against  them  in  the  market. 

How  this  novel  combination  of  financial 
forces,  engineered  throughout  by  the  brain 
of  Mr.  Morgan,  gained  control  of  the  ex 
change  market,  and,  through  a  period  of 
eight  or  nine  months,  retained  control  and 
continued  to  pile  up  a  reserve  in  the  Treas 
ury,  thus  insuring  the  solvency  of  the  cur 
rency  and  the  safety  of  business,  is,  perhaps, 
a  matter  too  recondite  to  prove  generally  in 
teresting.  In  the  beginning,  as  the  enterprise 
was  floated  along  by  the  natural  reaction  of 
an  oversold  market,  there  came  a  time  in 
the  middle  of  summer  when  things  again 
looked  critical,  when  the  simple  process  of 
piling  up  a  balance  on  the  other  side  of  the 
ocean  by  selling  American  securities  in  order 
to  keep  down  the  price  of  exchange  became 
almost  worked  out ;  some  rapid  cabling  then 
took  place  between  Mr.  Morgan  in  Paris 
and  Mr.  Bacon  at  the  Morgan  office  in  Wall 
Street.  But  when  the  syndicate  wound  up 
its  business  affairs  in  the  autumn,  the  gold 
reserve  stood  well  over  the  required  hun- 


190        J.  PIERPONT  MORGAN 

dred  millions,  and  the  object  had  been  at 
tained. 

The  charge  has  so  often  been  made  that 
Mr.  Morgan  gained  an  enormous  personal 
profit  in  this  transaction  that  almost  any 
other  man  would  have  spoken  in  his  own  de 
fence.  Whenever  the  subject  was  alluded 
to  in  his  presence  it  simply  irritated  him. 
He  never  thought  of  meeting  the  public  half 
way  with  an  explanation.  When  a  news 
paper  accused  him  of  having  made  millions 
out  of  the  Government  he  would  toss  the 
paper  aside  contemptuously  without  a  re 
mark.  But  some  few  utterances  were  ob 
tained  from  him  in  a  later  investigation  of 
the  bond  sale — the  more  or  less  precious 
and  significant,  because  rare,  remarks  of  a 
silent  and  unexplanatory  man.  A  dialogue 
between  Mr.  Morgan  and  Senator  Platt  of 
Connecticut  and  afterward  Senator  Vest 
contains  it  all.  Senator  Platt  begins  by 
questioning  Mr.  Morgan  on  the  vexed  point 
of  his  opposition  to  a  popular  loan,  which 
brought  him  and  Mr.  Belmont  in  such  haste 
to  Washington : 

SENATOR  PLATT — Why  did  you  not  want  to  have 
an  issue  of  bonds   after  you  had  commenced  your 


RELIEF  OF  THE  GOVERNMENT     191 

negotiations?  You  asked  the  President  not  to  issue 
a  bond  call.  What  was  your  reason  for  doing  that? 

MB.  MORGAN — Because  I  knew  that  if  the  call  was 
made  the  public  would  understand  that  the  foreign 
negotiation  had  been  abandoned. 

SENATOR  PLATT — When  it  was  understood  that  you 
were  negotiating,  shipments  ceased  ? 

MR.  MORGAN — Absolutely;  and  they  did  not  com 
mence  until  a  month  afterward. 

SENATOR  PLATT — And  so  your  real  purpose,  as  I 
understand  you,  in  this  transaction  was  not  the  idea 
that  you  could  take  this  bond  issue  and  make  money 
out  of  it,  but  that  you  could  prevent  a  panic  and  dis 
tress  in  the  country. 

MR.  MORGAN — I  will  answer  that  question,  though  I 
do  not  think  it  necessary,  in  view  of  all  that  I  have 
done.  I  will  say  that  I  had  no  object  except  to  save 
the  disaster  that  would  result  in  case  that  foreign 
gold  was  not  obtained. 

SENATOR  VEST — If  that  was  your  sole  object,  why 
did  you  specify  in  your  telegraphic  communication  to 
Mr.  Carlisle  that  your  house,  or  you  and  Mr.  Belmont, 
were  to  have  exclusive  control  of  the  matter? 

MR.  MORGAN — Because  it  was  absolutely  impossible 
for  more  than  one  party  to  negotiate — to  make  the 
same  negotiation  for  the  same  lot  of  gold.  It  would 
only  have  made  competition. 

SENATOR  VEST — If  the  gold  was  abroad  I  take  it 
for  granted  that  anybody  could  get  hold  of  it  who 
had  the  means  to  do  so.  If  you  were  actuated  by  the 
desire  to  prevent  a  panic,  why  were  you  not  willing 
that  other  people  should  do  it,  if  they  wanted  to  ? 

MR.  MORGAN — They  could  not  do  it. 


192        J.  PIERPONT  MORGAN 

They  could  not  do  it. 

To  Mr.  Morgan  this  was  simply  a  matter 
of  fact.  He  could.  He  did.  There  was 
nothing  more  to  be  said.  No  part  of  his 
duty,  as  he  saw  it,  consisted  of  talking  about 
what  he  had  done,  or  defending  himself.  If 
you  should  inquire  of  Mr.  Morgan  how 
much  he  made,  he  would  probably  reply: 
"Ask  the  members  of  the  syndicate."  He 
personally  would  no  more  remember  to-day 
what  the  figure  was  than  he  remembered 
the  exact  section  of  the  law — which  he  re 
called  as  "  Number  four  thousand  and 
something."  His  profit  must  have  been 
the  share  of  his  firm  in  the  total  profits  of 
the  syndicate — plus  his  own  commission  for 
management,  which  did  not  exceed  the  ordi 
nary  banker's  commission. 

The  year  after  the  bond  contract,  when 
the  newspapers  were  attacking  him  on  this 
account,  a  friend,  who  was  walking  with 
him,  asked  him  the  question  direct.  Mr. 
Morgan  did  not  answer.  After  a  while  he 
turned  to  a  fox  terrier  which  was  trotting 
behind  them,  and  asked : 

"What  do  you  think  of  the  dog?" 


EELIEF  OP  THE  GOVERNMENT     193 

The  other  looked  at  the  fox  terrier,  and 
made  some  casual  answer. 

"Take  another  look  at  him,"  insisted 
Mr.  Morgan,  calling  the  dog  up  to  him. 

His  friend  looked  again  and  then  he  saw 
an  inscription  written  on  the  collar: 

"  EMERGENCY.  Presented  by  Au 
gust  Belmont  to  J.  P.  Morgan  as  a  souvenir 
of  February,  1895." 


CHAPTER  X 

UNITED   STATES  STEEL 

SIX  years  later  Mr.  Morgan  created  the 
United  States  Steel  Corporation;  the 
flotation  of  the  " billion  dollar  trust,"  as  it 
was  called,  caught  the  eye  of  the  public  the 
world  over.  It  was,  and  remains,  still,  the 
greatest  and  most  characteristic  Morgan  en 
terprise;  an  enormously  complicated  piece 
of  business  in  the  beginning,  of  which  only 
the  motive  for  doing  it  was  simple  and  un 
complicated.  The  motive  was  the  elimina 
tion  of  Carnegie  from  the  steel  industry. 
This  was  the  starting  point  of  the  whole 
enormous  transaction. 

It  will  be  no  news  to  a  waiting  world  to 
declare  that  Mr.  Morgan  does  not  give,  or 
attend,  lectures  of  any  kind,  whether  writ 
ten  or  sonorously  shouted,  that  he  seldom 
makes  speeches  or  listens  to  long  ones,  that 
he  is  equally  remiss  in  exploiting  his  own 

views"  and  in  waiting  upon  others  who 


VIC  WO          ClllU.     Ill      W61 

194 


UNITED  STATES  STEEL       195 

are  exploiting  theirs.  He  does  not  differ  in 
this  particular  trait  from  most  of  his  gen 
eration  who  have  brilliantly  succeeded  in 
practical  affairs,  to  whom  talk,  argument, 
agitation,  leading  neither  to  pure  pleasure 
on  the  one  hand,  nor  to  a  " proposition"  on 
the  other,  are  simply  against  nature.  The 
late  Abram  S.  Hewitt,  when  he  was  asked  to 
contribute  money  to  charity,  used  to  request 
a  long  report,  going  into  all  the  details,  pros 
and  cons,  of  the  matter  in  hand;  he  would 
study  this  report,  and  afterward  give  his 
decision.  This  is  proof  that  Mr.  Hewitt 
was  not  as  our  most  modern  multi-million 
aire  financial  Titans  are;  he  was  an  old- 
fashioned  business  man  become  rich  in  the 
days  when  the  game  was  not  less  absorbing, 
but  relatively  less  momentous  and  not  yet 
imperial;  who  felt  out  of  place  in  the  first 
directorate  of  the  Steel  Trust,  and  who  was 
bred  a  school  teacher.  No  one  would  ex 
pect  Mr.  Morgan  to  fasten  his  mind  on  any 
sort  of  jog-trotting  dissertation  and  to  offer 
his  subscription  forthwith. 

The  matter  would  be  brought  about  quite 
differently — how  is  not  to  be  related  at  this 
moment,  though  very  interesting  and  very 


196        J.  PIEEPONT  MOEGAN 

significant.     Mr.  Morgan,  in  his  capacity 
of  industrial  fire-bringer  to  a  coming  gener 
ation   of   capitalists,   seems  to   have   per 
formed  his  enormous  labours  without  plan, 
map,  or  time  table,  except  such  as  he  carried 
in  his  head.    Instinctive,  his  friends  call 
him;  they  never  lose  an  opportunity  of  ex 
pressing  their  genuine  awe  at  his  power  of 
instantaneous  decision,  manifested,  in  the 
midst  of  the  most  bewildering  welter  of  af 
fairs.    From  which  it  is   clear  that  Mr. 
Morgan    always    knows    exactly    what    he 
wants,  and  that  his  character  works  through 
his  mind  and  governs  its  operations  without 
friction  or  debate  anywhere  within.    With 
that  character  and  mind  he  felt  and  dis- 
Jcovered    long    ago    that    competition    is 
waste,  is  war  in  its  worst  effect;  that  when 
Ibusiness  men  jump  into  a  fight  with  one 
another,  using  capital  for  powder  and  mus 
kets,  they  are  destroying  not  onty  them 
selves,  but  also  the  goods  of  the  world.     Mr. 
Morgan  found  this  out  long  before  the  econ 
omists  got  hold  of  it;  it  came  to  him  di 
rectly;  for  his  own  money — he  had  inher 
ited  ten  millions  from  his  father — and  the 
money  for  which  he  stood  in  a  way  respon- 


UNITED  STATES  STEEL       197 

sible  as  investing  banker  was  drained  away 
at  times  in  this  hopeless  channel.  There 
fore,  in  any  practical  case  presented  to  him, 
Mr.  Morgan  never  found  himself  in  doubt  as 
to  what  to  do,  since  most  questions  finally 
resolved  themselves  into  a  choice  between 
doing  something  which  would  injure  the 
value  of  an  investment,  and  doing  some 
thing  which  would  increase  that  value  and 
tend  to  make  it  permanent. 

Seldom  as  he  has  expressed  it  in  words, 
Mr.  Morgan  has  stood  in  a  unique  way  for 
the  principle  that  capital  must  always  or-4 
ganise  and  do  away  with  internal  friction,4 
war,  waste,  among  its  factors  and  segments. 
He  has  been  the  great  Progressive  among 
capitalists,  and  brought  his  ideal  into  ex 
istence  without  verbal  agitation,  but  by  a 
succession  of  powerful  deeds.  Whether  he 
is  a  progressive  in  the  broad  sense  depends 
upon  whether  you  think  the  changes  of  the 
past  twenty  years  are  an  improvement  in 
the  condition  of  the  country  or  otherwise. 
Our  purpose  is  to  relate  the  life  of  Mr.  Mor 
gan  without  introducing  political  discus 
sion.  But  it  is  impossible  to  write  that  life 
without  stating  the  simple  observation  that 


198        J.  PIEKPONT  MORGAN 

is  inevitably  to  be  drawn  from  any  study 
of  his  career,  namely,  that  he  has  always 
,-and  everywhere  worked  to  bring  about  the 
strengthening  of  the  power  of  invested  cap- 
:  ital,  and  that  this  has  been  his  life  accom- 
i  plishment.      Through     him     more     than 
through  any  other  human  agency  business 
has  become  imperial,  and  from  this  the  po 
litical  question  is  made. 

In  the  United  States  Steel  Corporation 
we  have  an  enormously  powerful  and  ef 
ficient  engine  of  industry,  of  the  most  mod 
ern  character  in  the  world.  It  is  as  unlike 
an  old-fashioned  American  business  of  half 
a  century  ago  as  Peter  Cooper's  apple  bar 
rel  engine  was  like  the  fleckless  steel  won 
der  that  draws  the  Twentieth  Century  Lim 
ited;  except  that  it  has  attained  a  feudal 
character  in  its  relations  with  labour  that 
does  indeed  hark  back  to  an  even  simpler 
day.  Much  is  known  about  the  Steel  Trust, 
almost  everything,  indeed,  that  is  of  much 
importance,  except  what  will  never  be 
known — its  trade  secrets,  so  to  speak,  such 
as  the  actual  cost  of  production  and  the 
foundation  for  the  prices  it  makes  and 
maintains  for  its  products.  But  the  Steel 


UNITED  STATES  STEEL       199 

Trust  takes  a  new  and  fresh  interest  when 
looked  at  from  the  viewpoint  of  a  Ufejof 
J.  RJM^rjjan.  He  made  it.  This  is  not 
spying  he  made  everything  about  it — Kelly, 
the  Kentucky  iron  maker,  who  discovered 
the  use  of  the  air  blast,  Bessemer,  Mushet, 
Ward,  Hewitt,  Jones,  Carnegie,  Frick, 
Schwab,  Corey ;  and  then  the  Amalgamated 
Association  of  Iron  and  Steel  Workers; 
and  then  the  coming  of  the  Steel  Age,  steel 
cities,  subways,  ships,  armour  plate,  furni 
ture,  the  element  of  steel  entering  into  al 
most  every  commercial  calculation  of  size 
and  importance ;  and  then  the  crowding  into 
Pittsburg  of  tons  and  tons  of  fresh,  muscu 
lar,  solid  human  flesh  from  the  backward 
districts  in  Europe — Hungary,  Poland, 
Eussia — provided  with  little  brain  but 
brute  strength  for  the  making  of  steel — all 
these  and  many  more  than  need  be  men 
tioned  of  surging  forces  have  come  together 
to  make  the  Steel  Trust  possible  and  to 
make  it  what  it  is.  Nevertheless,  it  is 
worth  while  to  think  it  the  incarnation  of 
Pierpont  Morgan.  Ik  its  way  it  is  the  best 
expression  of  his  idea^)f  the  idea  of  his  life, 
there  is.  From  its  birth  ten  years  ago  till 


200        J.  PIEEPONT  MORGAN 

now  it  has  been  a  monument  to  him,  the 
truest  creation,  all  alive  and  forging  power 
fully  on  its  course,  of  his  own  will. 

In  the  year  1900  Andrew  Carnegie  was 
a  very  rich  man,  as  he  is  now;  but  then  he 
was  chief  of  the  turbulent  kingdom  of  steel, 
and  it  was  essential  in  the  very  nature  of 
the  competition  of  that  time  that  he  should 
struggle  and  fight  with  all  the  enormous 
power  of  his  wealth  and  alliances  to  keep 
his  place  at  the  head.  If  he  had  not  been 
willing  to  throw  a  million-dollar  steam 
hammer  on  the  scrap  heap  to  make  way  for 
a  better  tool,  if  he  had  not  sprung  at  the 
throat  of  each  rising  competitor  and  fought 
every  transportation  company  that  strove 
to  make  any  money  out  of  him,  then  he 
would  have  given  place  to  a  new  Carnegie 
with  a  different  name.  One  of  the  shrewd 
est  and  most  audacious  of  men  in  his  own 
way,  Andrew  Carnegie  had  no  mind  for 
that  inglorious  end,  and  when  the  great 
Pennsylvania  railroad  refused  to  allow  him 
greater  rebates  for  carrying  his  iron  and 
steel  goods  from  Pittsburg  to  the  sea,  he  re 
torted  that  he  would  build  his  own  railroad. 
The  surveys  were  actually  made.  Just 


UNITED  STATES  STEEL       201 

when  Mr.  Morgan  and  his  friends  were  in  a 
position  to  tell  themselves,  after  innumer 
able  costly  reorganisations,  bankruptcies 
and  rate  wars,  that  the  building  of  hostile 
competing  lines  was  over,  for  good  and  all,— 
here  was  Carnegie's  proposal.  He  was  in 
dependent,  did  not  have  to  seek  his  capital 
in  Wall  Street;  no  one  could  prevent  him 
from  doing  what  he  pleased. 

At  about  the  same  time  Carnegie  seems 
to  have  started  out  to  make  a  clean-up  in 
the  steel  business,  for  he  proceeded  to  start 
so  many  irritating  and  alarming  enterprises 
at  once  that  the  whole  financial  world  took 
fright.  "Within  a  few  days  announcements 
were  made  that  the  independent  Carnegie 
railroad  to  tidewater  would  be  soon  begun, 
that  a  new  $12,000,000  steel  plant  would 
be  constructed  at  Conneaut,  0. ;  that  a  sheet 
steel  plant  would  be  established  at  Du- 
quesne,  that  a  big  shipyard  and  dry  dock 
would  be  built  at  Conneaut,  not  to  speak  of 
intimations  that  the  Carnegie  company  was 
about  to  enter  fresh  fields  of  steel  manufac 
ture. 

Carnegie  wanted  someone  to  buy  him  out, 
—as  he  had  made  up  his  mind  to  retire ;  but 


202        J.  PIERPONT  MORGAN 

instead  of  sitting  down  and  waiting  for  of 
fers,  he  dashed  out  and  built  bonfires  all 
around  the  enemy's  camp.  It  has  been  said 
that  millionaires,  when  they  are  frightened, 
run  to  J.  P.  Morgan  like  chickens  to  the 
mother  hen.  Something  of  the  sort  cer 
tainly  took  place  upon  this  occasion.  He 
was  the  only  man  able  to  deal  with  a  situ 
ation  of  this  kind.  He  had  the  brain  and 
he  had  the  money;  not  his  own  money,  but 
money  as  good  as  his,  which  would  instantly 
flowr  to  him  out  of  respect  for  the  workings 
of  that  brain. 

Mr.  Morgan  was  not  the  originator  of 
the  idea  out  of  which  developed  the  United 
States  Steel  Corporation.  His  early  rela 
tion  to  the  proposition  was  chiefly  that  of  a 
banker,  but  a  banker  upon  a  scale  without 
precedent  in  the  history  of  industry.  Vari 
ous  claims  have  been  made  in  support  of 
the  statement  that  this  or  that  man  was  the 
first  to  plan  the  United  States  Steel  Corpo 
ration.  In  all  probability,  however,  the 
proposition  represents  an  evolution  rather 
than  a  distinctly  original  idea. 

The  first  concrete  conception  of  the  or 
ganisation  was  that  of  John  W.  Gates,  of 


UNITED  STATES  STEEL       203 

the  Steel  Wire  Corporation;  in  the  latter 
part  of  the  la$t  century  Gates  tried  to  es 
tablish  a  community  of  interest,  a  sort  of 
international  trust,  in  which  certain  steel 
and  iron  manufacturers  of  Germany  were 
to  join  with  the  steel  and  iron  manufactur 
ers  of  the  United  States,  for  the  purpose 
of  fixing  prices  and  apportioning  markets 
to  the  manufacturers  of  each  nation.  In 
this  attempt  was  the  germ  of  the  United 
States  Steel  Corporation. 

There  were  other  considerations  besides 
that  of  averting  a  steel  war  that  appealed 
to  Mr.  Morgan.  With  the  first  inauguration 
of  President  McKinley  there  came  an  im 
provement  of  agricultural  and  financial  con 
ditions  throughout  the  United  States.  The 
silver  question  had  been  eliminated.  The 
currency  system  of  the  United  States  had 
been  declared  by  law  to  stand  exclusively 
upon  the  gold  basis.  A  disastrous  proces 
sion  of  lean  years  came  suddenly  to  an  end. 
In  1897  we  had  a  very  favourable  inter 
national  trade  balance.  In  1898  that  bal 
ance  was  unprecedently  large.  There  had 
been  another  failure  of  the  wheat  crop  in 
Europe,  while  our  own  wheat  harvest  was 


•J04        J.  PIERPONT  MORGAN 

unusually  good.  England's  demand  upon 
us  for  cotton  was  almost  unprecedented. 
Our  exports  touched  high  water  mark. 
Railroads  wTere  beginning  to  feel  the  effect 
of  this  prosperity.  The  farmers  of  the 
West  began  paying  off  mortgages,  for  the 
balance  upon  the  year's  transactions  was 
largely  in  their  favour.  Money  began  to 
flow  to  the  United  States  from  Europe; 
and  in  1899  we  received  from  Europe  one 
hundred  millions  in  gold,  in  part  payment 
of  international  trade  balances. 

The  best  estimate  is  that,  between  1897 
and  1901,  the  United  States  easily  absorbed 
about  a  thousand  millions  of  American  rail 
way  securities,  which  had  been  for  years 
held  in  Europe,  and  still  there  were  large 
accumulations  of  money  left. 

The  abundance  of  money  capital  created 
as  a  result  of  the  successful  reorganisa 
tion  of  railways,  largely  done  under  the 
leadership  of  Mr.  Morgan,  and  the  lesson 
which  the  abler  business  men  had  by  that 
time  begun  to  learn, — namely,  that  the  true 
philosophy  upon  which  large  corporate  un 
dertakings  must  be  based  if  they  were  to  be 
•essful,  consisted  in  adopting  such  meth- 


UNITED  STATES  STEEL       205 

ods  as  would  make  it  possible  to  secure  the 
largest  output  of  product  of  highest  qual 
ity  at  the  smallest  cost.  This  involved  the 
use  of  the  highest  grade  of  labour-saving 
machinery,  the  employment  of  a  percentage 
of  skilled  artisans  to  whom  high  wages  were 
paid,  and  the  harmonising  of  plants  so  that 
the  cost  of  transportation  of  raw  materials 
to  the  factories,  and  of  the  product  of  the 
factories  to  the  markets,  would  be  reduced 
to  the  lowest  point  possible. 

These  were  considerations  which,  when 
presented  to  Mr.  Morgan,  were  instantly 
grasped  and  judged  by  that  special  intuitive 
talent  which  has  always  been  his.  For 
the  most  part  his  entire  career,  outside  of 
ordinary  banking,  was  associated  with  the 
reorganisation  of  railroads.  He  had  had 
comparatively  little  experience  of  that  kind 
in  connection  with  corporations  engaged  in 
manufacture.  He  was  not  identified,  except 
possibly  as  a  banker,  with  either  of  the  two 
huge  corporate  combinations  then  existing— 
the  Sugar  Trust  and  the  Standard  Oil  Com 
pany. 

To  succeed,  a  combination  of  this  kind 
had  to  be  far-reaching,  national  in  its  scope. 


206        J.  PIERPONT  MORGAN 

It  must  include  ten  or  twelve  corporations, 
each  one  of  which  was  represented  by  capi 
tal  stock  running  from  fifty  millions  to 
nearly  a  hundred  millions;  and  the  whole 
undertaking  necessarily  called  for  the  as 
sistance  of  one  masterly  financial  construct 
ive  genius,  whom  millions  did  not  appal 
merely  from  the  size  of  the  figures. 

Mr.  Morgan  was  apparently  the  man  for 
the  work,  the  single  individual  who  could,  if 
he  would,  bring  an  undertaking  of  that  kind 
to  a  successful  conclusion.  Therefore  he 
was  appealed  to,  to  undertake  the  financial 
promotion  of  what,  if  successful,  was  to 
be  the  world's  greatest  industrial  corpora 
tion. 

Through  the  greater  part  of  1900  the 
preliminary  statements  upon  which  the  or 
ganisation  of  the  Steel  Corporation  was  to 
be  based  were  in  the  course  of  preparation. 
As  a  whole  they  embodied  a  mass  of  sta 
tistics,  figures  representing  capital,  bonded 
indebtedness,  income  and  cost  of  operation 
and  the  like,  of  the  several  corporations 
which  were  to  be  included  in  the  Steel  Cor 
poration,  which,  as  a  whole,  exceeded  any 
other  statements  ever  made  to  Mr.  Morgan, 


UNITED  STATES  STEEL       207 

in  the  magnitude  of  the  capital  and  other 
money  dealings  involved. 

Mr.  Morgan  was  never  staggered,  either 
by  the  mass  of  detail  or  the  aggregate  sum 
which  this  combination  would  represent. 
He  went,  in  every  instance,  to  the  heart 
of  the  matter,  seeming  to  read  intuitively 
into  the  vitals  of  every  statement.  No 
man  in  the  United  States  was  ever  able  so 
quickly  to  analyse  a  balance  sheet  as  Mr. 
Morgan  then  was  and  now  is.  He  grasped 
instantly  the  meaning  that  lay  behind  the 
figures,  that  told  of  the  operation,  the  in 
come  and  the  methods  of  the  Carnegie 
Company.  His  mind  looked  into  the  fu 
ture;  and  he  had  a  perfect  understanding 
of  some  of  the  chief  savings  that  might  be 
effected  by  a  combination  of  this  kind.  For 
instance,  such  a  combination  would  natu 
rally  bring  to  the  great  steel  producing 
plants  of  the  Mississippi  Valley  the  com 
mand  of  the  market  of  that  valley. 
Thereby  the  cost  of  transportation  from 
the  plant  to  the  market  would  be  greatly  re 
duced,  since  orders  obtained  from  that  mar 
ket  would  naturally  go  to  the  nearest  man 
ufacturing  plant. 


208        J.  PIERPONT  MORGAN 

I  He  felt  that  a  combination  of  this 
I  kind  would,  so  far  as  the  West  at 
I  least  was  concerned,  make  the  steel  cor- 
/  poration  practically  independent  of  any 
tariff.  Or,  in  other  words,  whatever  tariff 
rates  upon  iron  and  steel  products  might 
be  satisfactory  to  independent  producers 
would  be  entirely  satisfactory  to  the  con 
templated  corporation.  He  pointed  out  the 
importance  of  procuring  practically  perpet 
ual  leases  or  ownership  of  the  great  ore 
fields  of  Northern  Minnesota;  and  the  re 
cent  establishment  of  the  steel  city  of  Gary 
at  the  head  of  Lake  Michigan  was  due  to 
suggestions  which  were  made  by  Mr.  Mor 
gan  when  the  organisation  of  the  steel  cor 
poration  was  under  consideration. 

Also  the  charter  of  the  company  must 
contain  franchises  which  would  permit  the 
corporation  to  do  many  kinds  of  business 
outside  the  strictly  technical  limitations  of 
the  manufacture  of  iron  and  steel  prod- 
^ucts.  Mr.  Morgan  believed  that  the  char 
ter  should  contain  a  franchise  to  own  and 
develop  lands  containing  coal  or  iron  or 
any  other  mineral  product  utilised  in  the 
manufacture  of  steel,  and,  in  fact,  cover- 


UNITED  STATES  STEEL       209 

ing  all  possible  mining  except  that  of  the 
precious  metals.  The  corporation  should 
have  the  right  of  franchise  to  build  ships, 
machinery,  bridges,  all  kinds  of  vehicles 
needed  for  transportation,  even  aqueducts 
or  canals,  if  these  should  be  found  essential. 
It  was  to  have  the  right  to  deal  in  patents, 
to  engage  in  any  kind  of  manufacture  or 
transportation,  and  to  possess  certain  rights 
of  eminent  domain,  at  least  within  the  State 
from  which  the  corporation  articles  were  to 
be  obtained.  It  would  be  necessary  for  it 
to  have  the  right  to  do  certain  kinds  of 
banking  business.  The  suggestions  made 
by  Mr.  Morgan,  together,  of  course,  with 
those  made  by  others  and  approved  by  him, 
were  afterward  embodied  in  one  of  the 
broadest  operative  charters  ever  granted  by 
a  State. 

There  remained  nothing  but  the  financing 
of  this  corporation.  Very  likely  Mr. 
Schwab,  Judge  Gary,  John  W.  Gates,  or 
any  one  of  half  a  dozen  of  those  wrho  were 
directing  the  management  of  the  Carnegie 
Company,  could  have  worked  out  a 
thoroughly  practical  combination  upon  the 
side  of  manufacture  and  management,  but 


210        J.  PIERPONT  MORGAN 

upon  no  one  but  Mr.  Morgan  could  the  re 
sponsibility  for  the  successful  financing  of 
the  proposition  have  been  placed.  That  in 
volved  a  decision  as  to  the  manner  in  which 
the  stock  of  the  subsidiary  companies  was 
to  be  paid  for  by  the  parent  company, — a 
vastly  complicated  question.  How  much 
preferred  stock  and  how  much  common 
should  be  issued  by  the  parent  company  to 
pay  for  the  capital  stock  of  the  subsidiary 
companies?  That  was  a  problem  which 
none  but  a  genius  in  finance  could  work 
out;  for  there  were  many  men  of  many 
minds  to  be  considered. 

Then,  too,  there  was  the  manner  in 
which  the  bonded  indebtedness  of  the  sub 
sidiary  corporations  was  to  be  cared  for. 

Beyond  all  this  was  the  supreme  question 
involving  the  ability  of  the  public  to  absorb 
such  part  of  the  securities  of  the  United 
States  Steel  Corporation  as  were  not  issued 
in  payment  for  the  stock  of  the  subsidiary 
companies. 

The  proposition,  when  fully  worked  out, 
represented  the  creation  of  new  capital  ag 
gregating  about  one  billion  four  hundred 
million  dollars.  Mr.  Morgan's  mind 


CHARLES  M.  SCHWAB  HENRY  C.   FRICK 


ELBERT  H.  GARY 


J.  A.  FARRELL 


UNITED  STATES  STEEL       211 

grasped  and  answered  this  proposition  with 
a  quickness  that  amazed  those  who  were 
then  brought  in  touch  with  him.  Here  his 
constructive  power  was  revealed  more 
clearly  than  at  any  other  time  in  his  career ; 
it  must  be  remembered  that  an  industrial 
proposition  was  almost  new  to  him.  He 
had  no  doubt  that  if  the  stockholders  of 
the  subsidiary  companies  agreed  upon  the 
terms  of  the  transfer  of  their  stock  to  the 
new  corporation,  the  public  would  not  hesi 
tate  about  accepting  such  share  of  this  stock 
as  was  offered.  In  this  he  was  right.  The 
billion  dollar  corporation  was  the  industrial 
wonder  of  the  world,  when  it  was  an 
nounced;  but  the  still  greater  wonder  was 
the  celerity  with  which  the  American  people 
absorbed  the  stock  offered  to  them. 

Here  was  a  proposition  involving,  in  the 
aggregate,  the  organisation  of  a  company 
with  a  total  stock  capital  of  eight  hundred 
and  ninety  million  dollars  (round  num 
bers),  and  with  a  bonded  indebtedness  of 
three  hundred  millions  (round  numbers). 
The  greater  part  of  the  stock  of  the  new 
corporation  was  given  in  exchange  for  the 
stock  of  the  constituent  companies.  These 


212        J.  PIERPONT  MORGAN 

companies  were  the  Carnegie  Company,  the 
Federal  Steel,  the  National  Tube,  the  Nat 
ional  Steel,  the  American  Steel,  the  Ameri 
can  Steel  Hoop,  the  American  Tin  Plate, 
the  American  Steel  &  Wire,  the  American 
Bridge,  the  Shelby  Steel  Tube,  companies, 
and  the  Lake  Superior  Mines. 

In  perfecting  the  organisation,  Mr.  Mor- 

'  gan  regarded  it  as  essential  that  practically 
the  entire  issue  of  capital  stock  of  what  be 
came  subsequently  the  constituent  compa- 

I  nies  of  the  United  States  Steel  Corporation 

/  should  be  acquired  by  the  Steel  Corporation. 
In  exchange  therefor  the  stockholders  of 
these  subsidiary  companies  were  to  receive 

<_  preferred  and  common  stock  of  the  Steel 
Corporation. 

The  underwriting  syndicate  had  acquired, 
first  of  all,  nearly  one  hundred  millions  of 
the  capital  stock  of  the  Carnegie  Company, 
and  a  little  over  one  hundred  and  fifty  mil 
lions  of  its  five  per  cent,  bonds.  It  paid  for 
these  securities,  first,  with  three  hundred 
and  three  millions  (round  numbers)  of  the 
first  mortgage  bonds  of  the  United  States 
Steel  Corporation,  with  $1,200,000  ad 
ditional  in  cash;  and  it  subsequently  se- 


UNITED  STATES  STEEL       213 

cured  sixty-four  millions  of  the  Carnegie 
stock  (practically  all  there  was),  and  paid 
for  it  with  982,000  shares  of  the  preferred 
stock  and  902,000  shares  of  common  stock. 

When  the  stock  of  the  United  States 
Steel  Corporation  was  offered  to  the  public, 
the  second  of  the  tests  of  confidence  in  Mor 
gan  ?s  judgment  and  integrity  was  made. 
There  were  before  this  offering  grave 
doubts  whether  the  public  would  buy  these 
securities,  notwithstanding  the  fact  that  the 
common  stock  was  issued  on  a  four  per  cent, 
dividend  basis,  and  the  preferred  stock  on 
a  seven  per  cent,  basis.  But  it  immediately 
became  apparent  that  these  securities  would 
be  speedily  bought  up,  notwithstanding  the 
quantity  of  them.  They  were  absorbed 
within  a  few  months.  The  public  took  this 
stock  at  a  price  a  little  in  excess  of  the 
figure  at  which  it  was  underwritten  by  the 
syndicate  organised  by  Mr.  Morgan. 

The  underwriting  of  the  colossal  United 
States  Steel  Corporation  proposition,  and 
the  swift  and  vast  success  of  it  will  al 
ways  be  regarded  as  the  greatest  of  Mor 
gan's  achievements.  It  was  not  only  great 
in  the  actual  size  of  the  undertaking,  and 


214        J.  PIEBPONT  MORGAN 

in  the  experimental  nature  of  it,  but  it  was 
something  special,  in  the  sense  that  it  re 
vealed  the  confidence  which  Morgan  had 
established  throughout  the  business  world 
of  the  United  States  and  of  Great  Britain. 
Ex-Mayor  Grace  of  New  York  once  told 
of  his  own  experience  with  the  affair,  which 
shows  the  way  it  was  done.  He  received 
by  mail  one  day  a  very  brief  communica 
tion,  signed  by  J.  P.  Morgan  &  Co.,  stating 
that  he  had  been  allotted  participation  in 
the  underwriting  of  the  United  States  Steel 
Corporation  to  the  extent  of  one  hundred 
thousand  dollars.  At  no  time  before  he  re 
ceived  this  communication  had  any  intima 
tion  come  to  him  that  Mr.  Morgan  had  his 
name  in  mind  when  organising  the  under 
writing  of  the  Steel  Corporation  stock.  In 
fact,  he  had  never  spoken  to  Mr.  Morgan 
about  the  proposed  organisation. 

To  subscribe  one  hundred  thousand  dol 
lars  to  an  underwriting  syndicate  meant 
that  he  must  risk  as  large  a  sum  as  that  en 
tirely  upon  his  confidence  in  J.  P.  Morgan. 
He  could  take  or  leave  the  invitation,  as  he 
chose.  He  might  be  compelled  to  pay  the 
one  hundred  thousand  dollars  in,  and  to  re- 


UNITED  STATES  STEEL       215 

ceive  and  to  carry  the  amount  of  stock  for 
which  this  one  hundred  thousand  dollars 
paid.  It  was  an  investment  of  the  nature 
of  which  he  knew  nothing.  He  had  heard 
that  the  organisation  involved  the  creation 
of  the  greatest  corporation  of  modern 
times;  so  great  that  it  was  already  being 
spoken  of  as  "a  billion  dollar  corporation." 

Of  that  one  hundred  thousand  dollars, 
the  former  Mayor  would  be  called  upon 
immediately  for  twelve  and  one-half  per 
cent.,  or  eight  thousand  dollars.  He  in 
ferred  that  this  first  payment  was  for  the 
purpose  of  providing  a  working  capital  for 
immediate  use, — as  indeed  it  was. 

Solely  as  a  matter  of  faith  in  Mr.  Mor 
gan  the  former  Mayor  accepted  the  i 
tion  to  .subscribe,  andhe^  w 
upon  for  one  cent  of  his  subscription  ex 
cept     the     eight     thousand     dollars.     He     \J  w 
learned  that  the  other  subscribers  had  also      ^  f 
paid  in  cash  twelve  and  one-half  per  cent,  of 
their  subscriptions,  and  the  total  of  these 
payments  furnished  a  cash  worEnj 

Iirdu<rtime  he  received  ms  proportionate 
part  of  the  profits  of  the  underwriting 
syndicate,  which  amounted  to  one  hundred 


216        J.  PIERPONT  MORGAN 

per  cent,  on  the  eight  thousand  dollars  he 
had  paid  in.  Based  upon  the  entire  sub 
scription  of  one  hundred  thousand  dollars, 
the  profits  were  about  twelve  and  one-half 
per  cent.  And  he  said:  "I  never  made 
money  as  easy  as  that." 

As  payment  for  putting  the  deal  through 
the  Morgan  syndicate  received  exactly  649,- 
897  shares  of  common  stock  of  the  corpora 
tion  and  an  equal  number  of  preferred 
shares.  The  syndicate's  profit,  net,  was 
about  two  hundred  per  cent,  on  the  amount 
of  cash  actually  paid  in.  In  order  to  make 
this  profit  the  syndicate  had  guaranteed  the 
sale  of  securities  amounting  to  one  billion 
four  hundred  million  dollars;  at  any  time 
events  might  have  conspired  to  swamp  them. 
An  illustration  of  the  chances  they  took  is 
furnished  by  the  experience  of  Henry  C. 
Frick,  who  undertook  the  public  flotation  of 
the  Carnegie  Company  some  years  ago.  He 
and  his  associates  put  up  as  a  bonus  one  mil 
lion  dollars  in  cash.  Before  they  succeeded 
in  putting  the  scheme  through  there  was  a 
disturbance  in  the  money  market  and  the 
enterprise  fell  through.  As  a  result  the 
million  dollars  was  forfeited  to  Carnegie, 


UNITED  STATES  STEEL       217 

who  had  given  the  option.  Had  the  panic 
of  Blue  Thursday,  which,  came  in  May, 
1901,  through  the  fight  for  control  of  the 
Northern  Pacific,  happened  in  March  or 
April,  the  steel  syndicate  would  surely  have 
met  with  disaster. 

After  the  United  States  Steel  Corpora 
tion  was  organised,  astonishment  was  ex 
pressed  by  financiers  and  others  that  John 
W.  Gates  had  not  been  elected  a  member 
of  the  board  of  directors.  It  was  assumed 
that  because  of  Mr.  Gates 's  intimate  rela 
tion  to  the  proposition  and  his  earlier  asso 
ciation  with  Mr.  Morgan  in  the  organisa 
tion  of  the  so-called  wire  trust,  he  should 
have  been  one  of  the  first  to  be  chosen  a 
director  of  the  new  corporation.  The  en 
tire  wire  industry  of  the  country  had  been 
brought  into  one  corporation,  very  largely 
through  the  effort  of  Gates.  Not  until  two 
years  later  was  the  real  reason  discovered 
wrhy  Mr.  Gates  was  not  chosen.  Morgan 
wras  called  as  a  witness  before  the  Interstate 
Commerce  Commission,  and,  in  the  course 
of  the  examination,  was  asked  some  ques 
tions  relating  to  John  "W.  Gates.  In  reply, 
Mr.  Morgan  said  that  he  considered  Mr. 


218        J.  PIERPONT  MORGAN 

Gates  a  dangerous  element  in  the  railroad 
world.  This  confirmed  the  story  that  Mr. 
Morgan  had  expressed  himself  personally  to 
Mr.  Gates  in  terms  far  more  vigorous  than 
those  in  which  he  answered  the  questions  of 
the  Interstate  Commerce  Commission. 

After  the  organisation  of  the  United 
States  Steel  Corporation  Mr.  Morgan's 
prestige  was  vastly  increased.  He  was  the 
guest  of  Emperor  William  in  July,  1902, 
and  the  formal  etiquette,  as  well  as  social 
distinction,  which  characterised  the  Emper 
or's  intercourse  with  Mr.  Morgan  equalled  in 
impressiveness  his  meetings  with  his  fellow- 
monarchs,  although,  of  course,  the  demon 
stration  was  of  a  different  kind.  The 
Emperor  visited  Mr.  Morgan  on  his  yacht, 
the  Corsair.  In  fact,  the  Emperor  and  Mr. 
Morgan  were  in  friendly  association  for 
several  days.  The  Emperor  sent  the  royal 
car  to  Kiel,  where  Mr.  Morgan's  yacht  was 
anchored,  for  the  purpose  of  bringing  Mr. 
Morgan  to  Berlin.  So,  also,  King  Edward 
met  Mr.  Morgan  on  the  Continent  and  after 
ward  received  him  as  a  personal  guest  at 
London,  making  it  apparent  to  all  who  saw 
the  two  men  upon  this  occasion  that  the 


UNITED  STATES  STEEL       219 

King  regarded  Mr.  Morgan  as  the  financial  I 
monarch  of  the  world.  Mr.  Morgan  had  | 
been  told  that  the  Emperor  had  often  ex 
pressed  the  wish  to  meet  the  man  whom  he 
described  as  having  accomplished  the  great 
est  financial  and  industrial  achievement  of 
modern  times.  What  he  thought  of  Mor 
gan,  after  meeting  him,  was  apparent  from 
his  manner.  What  Mr.  Morgan  thought  of 
him  was  expressed  in  his  characteristic  way. 
He  said,  "I  have  seen  the  Kaiser,  and  I  like 
him." 

The  task  of  executive  management  of  the 
Steel  Corporation  has  now  had  ten  years 
in  which  to  work  itself  out ;  at  the  very  be 
ginning  it  was  placed  on  a  basis  which 
would  keep  up  the  rivalry — in  efficiency— 
between  the  old  concerns.  The  proprietor 
corporation  does  not  operate  the  mines  or 
the  factories  or  run  the  vessels  and  rail 
roads.  Each  of  the  constituent  companies 
is  an  operating  company  with  its  own  presi 
dent,  officers  and  board  of  directors.  The 
Steel  Corporation  simply  maintains  a  close 
watch  upon  all  and  compares  results.  It 
dictates  the  labor  policy,  and  that  policy  has 
been  a  little  masterpiece  of  industrial  en- 


220        J.  PIERPONT  MORGAN 

gineering — from  the  point  of  view  of  the 
masters.  Almost  immediately,  that  is  to  say 
within  two  or  three  months  of  its  formation, 
the  Steel  Trust  encountered  one  of  the  big 
gest  strikes  in  the  history  of  the  steel  busi 
ness.  The  strike  began  on  the  first  day  of 
July,  1901,  and  lasted  until  September  15, 
when  work  was  resumed.  The  difficulty 
was  not  a  question  of  wages,  hours  of  labour, 
or  rules  or  conditions  of  work,  but  a  con 
test  for  recognition  of  the  union,  which  de 
mand  was  refused  by  Mr.  Morgan.  Mr. 
Morgan  said  "no  compromise,"  and  com 
promise  there  was  none. 

To-day  the  employers  are  organised,  the 
workmen  are  not;  the  Amalgamated  has 
not  even  a  footing  in  a  single  steel  mill 
handling  heavy  material.  In  its  relations 
with  labour  the  Steel  Corporation  is  a  pa 
ternal  institution;  it  hires  the  men  indi 
vidually. 

Social  workers  say  this  arrangement  is 
wrong  in  principle  and  will  surely  weaken 
the  steel  workers  as  a  class.  It  is  a  fact, 
however,  that,  in  the  days  of  its  power,  the 
Amalgamated  went  further  than  simply  to 
demand  a  voice  in  determining  labour  con- 


UNITED  STATES  STEEL       221 

ditions — it  demanded  a  share  in  administra 
tive  control  that  was  inconsistent  with  nec 
essary  business  methods.  So  the  steel  com 
panies  turned  and  crushed  Unionism.  But, 
like  the  Union,  which  in  the  days  of  its 
strength  demanded  all  the  benefits  of  an  in 
crease  in  tonnage  due  to  a  new  invention,  a 
more  effective  machine,  and  would  not  ac 
cept  a  reduction  in  the  rate  of  pay,  the  steel 
company  is  now  demanding  all  of  the  bene 
fits  of  increased  output,  whether  due  to  in 
ventions  or  to  physical  effort,  and  will  not 
permit  any  proportionate  advance  in  work 
men's  earnings.  To  bind  their  employees  to 
the  institution  they  have  introduced  profit- 
sharing  and  the  sale  of  stock  to  the  men. 
In  its  way,  this  is  good  for  the  men  and 
good  for  the  companies;  no  stockholder 
wants  to  try  to  organise  a  union  when  the 
terms  of  his  agreement  with  the  company 
state  that  only  those  who  slioiv  a  proper  in 
terest  in  its  welfare  and  progress  will  re 
ceive  a  bonus.  Never,  if  human  ingenuity 
can  prevent  it,  will  the  management  of  the 
Steel  Corporation  go  back  to  the  difficult 
days  before  Homestead,  when  the  men  ran 
the  mills. 


222        J.  PIERPONT  MOEGAN 

Great  growth  in  the  earning  power  of 
the  corporation  has  been  effected  by  a  per 
sistent  programme  of  improvement.  Since 
1901  no  less  than  $232,000,000  has  been 
taken  from  earnings  and  put  back  into  the 
plants  and  properties  of  the  company.  The 
original__water  in  the  stock  representing  the 
enormous  price  Carnegie  and  others  de 
manded  and  received  for  their  companies 
has  been  replaced  by  valuable  acres  of  min 
eral  lands  and  other  properties.  Finally, 
prices  have  been  stabilised,  a  factor  of  the 
utmost  importance  in  preventing  violent 
fluctuations  of  the  stock  in  the  market. 
While  the  Steel  Corporation  includes  less 
than  sixty  per  cent,  of  the  industry  in 
America,  it  will  eventually  control  abso 
lutely  all  the  raw  material  in  the  country. 
For  the  present  it  maintains  a  friendly 
community  of  interest  with  the  independ 
ent  companies,  and  a  kind  of  silent  ac 
quiescence  has  generally  prevented  price 
cutting.  Every  once  in  so  often  there  takes 
place  a  " Steel  dinner,"  at  which  the  heads 
of  the  various  companies  sit  down  to  meat 
with  the  Steel  Corporation;  at  which  it  is 
breathed  into  the  air  through  the  innocuous 


UNITED  STATES  STEEL       223 

medium  of  after-dinner  speeches  that  "  con 
ditions  are  good  in  the  steel  industry/'  and 
that  it  is  well  to  let  matters  run  on  as  they 
are. 

Thus  it  is  that  an  investor's  Golden  Age 
has  come  to  the  one-time  turbulent  steel 
industry;  vicious  and  stabbing  competition 
is  replaced  by  a  rivalry  in  producing  results. 
Twentieth  century  efficiency  has  been  in 
jected  into  all  its  veins;  men  and  machinery 
have  been  welded  into  a  monstrous  super- 
machine;  it  has  been  the  task  of  a  giant,  of 
the  foremost  builder  in  an  age  of  builders 
—and  of  jerry-builders — and  stands  to-day 
as  his  masterpiece. 


CHAPTER  XI 

THE  SPIRIT   OF   COMBINATION 

IN  the  year  1865,  when  J.  Pierpont  Mor 
gan  of  New  York  and  London  was  en 
gaged  exclusively  in  the  sale  and  purchase  of 
foreign  exchange,  when  railroads  and  the 
stock  market  knewT  him  not,  and  the  modern 
industrial  corporation  was  unborn,  the  fol 
lowing  prophetic  statement  appeared  in  one 
of  the  staid  and  thoughtful  London  jour 
nals: 

"We  are  at  the  outset  of  a  new  era  in 
social  progress  and  one  which  is  probably 
the  highest  to  which  material  civilisation 
can  attain.  It  is  the  era  of  cooperation. 
Hitherto  competition  has  been  regarded  as 
the  most  efficient  agent  of  social  progress. 
But  the  principle  of  competition  is  one  of 
rivalry  and  struggle.  It  is  a  system  of  beg- 
gar-my  neighbour,  most  useful  in  the  earlier 
stages  of  civilisation,  but  one  most  un 
worthy  of  civilisation  at  its  maturity.  It 

224 


SPIRIT  OF  COMBINATION     225 

is  costly,  for  it  requires  many  companies 
and  establishments  to  do  the  work  which 
would  be  more  economically  performed  by 
one." 

What  is  here  called  " cooperation,"  but 
which  really  signifies  the  use  of  the  com 
bination  principle  by  capitalists,  existed  in 
England  as  theory  long  before  it  blossomed 
out  in  America  in  the  tangible  form  of  the 
trusts.  With  us  the  theory  of  combination 
has  followed  a  long  distance  behind  the  prac 
tice,  and  by  the  same  token  so  have  the  eth 
ical  and  political  ideas,  codes,  and  practices 
that  should  apply  to  this  industrial  trans 
formation  failed  to  keep  the  pace.  Combi-/ 
nation  has  given  us  the  staggering  phenomey 
non  of  big  business.  Of  this  change  from 
competition  to  combination  the  chief  human 
agent  has  been  the  dynamic  and  instinctive 
personality  of  J.  P.  Morgan. 

I  say  chief  human  agent,  because  it  is 
very  apparent  that  during  the  past  twenty 
or  thirty  years  some  underlying  force,  the 
brute  force  of  nature  itself,  has  been  stead 
ily  operating  in  the  direction  of  the  concen 
tration  of  capital  and  the  unifying  of  scat 
tered  industrial  enterprises.  But  blended 


226        J.  PIERPONT  MORGAN 

with  this  powerful  and  irresistible  process 
of  change  have  been  individuals  powerful 
and  irresistible ;  their  names  readily  come  to 
mind — Carnegie,  Frick,  Rockefeller,  Hill, 
Huntington,  Harriman,  the  Goulds,  Van- 
derbilts — many  others  besides  J.  P.  Morgan. 
But  there  is  a  vital  difference  between  Mr. 
Morgan  and  these  others,  and  it  is  this :  their 
identification  with  the  combination  principle 
was  casual  and  the  result  of  circumstances ; 
they  have  as  often  been  competitors  as  com 
biners,  and  as  willingly  one  as  the  other ;  but 
Mr.  Morgan,  in  season  and  out  of  season, 
stood  for  combination  as  a  principle  and 
made  it  the  basis  of  his  business  life. 

As  soon  as  he  became  an  influential  factor 
in  the  financial  world  he  exerted  a  constant 
pressure  in  this  direction,  and  as  a  result  of 
his  solid  and  simple  stand,  fate  threw  larger 
opportunities  in  his  hands  than  in  those  of 
any  other  man  of  his  generation.  In  the 
period  from  1890  to  1900  the  railway  sys 
tems  of  the  country,  gigantic,  sprawling, 
and  weakened  to  the  point  of  helpless  im 
poverishment  by  competitive  battles,  were 
forced,  with  very  few  exceptions,  to  un- 


SPIRIT  OF  COMBINATION     227 

dergo  complete  reorganisation.     Mr.  Mor 
gan    proved    himself   the    most    successful 
reorganise!1,   and  he  used  the  power  and 
prestige  thus  gained  to  eliminate  competi 
tion  from  the  railroad  business.     The  next 
ten  years  brought  forth  numbers  of  indus-l 
trial    combinations;    Mr.    Morgan    bested! 
everyone  at  this  sort  of  work,  and  every  > 
corporation  he   formed   or   influenced   did/ 
away  with  real  competition. 

We  are  now  reaching  in  this  narrative  of 
Mr.  Morgan's  life  the  stage  of  results  and 
conclusions;  it  is  now  clear  what  he  stands 
for,  this  towering  idol  of  an  age  devoted 
passionately  to  facts,  money,  commerce,  effi 
ciency — to  results  immediate  and  sure.  Not 
mere  fortune-making  operations  have  placed  / 
him  where  he  is;  in  all  the  larger  under-/ 
takings  of  his  life  there  has  been  exerted,' 
a  kind  of  financial  statesmanship  tending  to 
create  a  more  or  less  permanent  and  assured 
money  return  for  all  investors  in  those 
enterprises.  As  to  his  method  it  is  clear 
that,  finding  men  hard  to  manage  but  easy 
to  command,  he  alwa}rs  and  everywhere 
took  command  and,  by  the  force  of  his  de- 


228        J.  PIERPONT  MORGAN 

cided  character  and  the  propulsion  of  his 
enormous  will,  made  things  go  in  the  new 
Morgan  grooves. 

Some  account  has  already  been  given  in 
this  book  of  his  railroad  reorganisations,  but 
it  yet  remains  to  describe  the  one  which 
proved  the  most  difficult,  and  also  to  bring 
together  the  widely  separated  features  of  his 
railroad  control  into  a  definite  picture  of 
one-man  power.  We  shall,  moreover,  soon 
consider  those  enterprises  and  events  that 
immediately  followed  the  flotation  of  the 
Steel  Corporation,  namely,  the  ill-fated 
"Steamship  Trust,"  the  Harvester  Trust, 
the  collapse  of  steel  common,  and  the  ship 
building  fiasco,  when  the  public,  completely 
reversing  its  hero-worshipping  attitude  of 
1901,  focussed  upon  J.  P.  Morgan  all  the 
bitterness  of  its  disappointment. 

It  was  about  midway  of  his  career  as  a 
master  of  railroads,  the  year  1893,  that 
Mr.  Morgan  undertook  a  railroad  reor 
ganisation  which  will  always  stand  out  as 
the  prime  example  of  his  peculiar  ability  for 
mastering  a  bewildering  and  apparently 
hopeless  situation.  There  was  then  a  loose 
organisation  of  railroads  in  the  South,  cov- 


SPIRIT  OF  COMBINATION     229 

ering  about  9,000  miles,  divided  among 
twenty-two  companies,  and  operating  under 
the  management  of  the  Richmond  Termi 
nal  Co.  The  combination  was  so  ill  put  to 
gether,  with  such  a  complicated  tangle  of 
securities  and  underlying  obligations  that 
lapped  and  overlapped  one  another,  that  it 
had  acquired  the  reputation  of  a  financial 
nuisance  of  the  first  order.  Factional 
quarrels  arising  from  unsettled  questions 
between  the  individual  companies,  each  jeal 
ous  of  its  rights,  and  each  claiming  a  little 
more  than  its  rights,  were  constantly  break 
ing  out;  no  power  had  arisen  which  could 
still  these  discordant  elements.  The  Rich 
mond  Terminal  was  a  shocking  exhibition 
of  confusion  and  disorder,  swayed  by  bel 
ligerents  who  acted  as  if  unconscious  of 
their  bankruptcy,  and  split  in  two  by  a  dis 
pute  impossible  of  decision  if  one  had  to  be 
fair  to  all  the  claims  and  exigencies  in  pos 
session. 

The  bondholders  named  a  committee  to 
struggle  with  the  problem,  and  the  commit 
tee  went  down  with  the  wreckage  of  their 
plans — and  stocks  went  down,  too.  An 
other  committee  was  named,  this  time  with 


230        J.  PIERPONT  MOKGAN 

Frederick  P.  Olcott,  President  of  the  Cen 
tral  Trust  Company  of  New  York,  as  chair 
man,  and  the  Olcott  committee  shuffled  the 
liabilities  and  the  fixed  charges  and  the 
claims  and  proportions  for  several  months, 
putting  out  figures  for  proposed  new  capi 
talisations,  and  seeking  strenuously  to  gain 
the  concurrence  of  an  immense  mass  of  se 
curities  divided  into  over  a  hundred  differ 
ent  classes — all  in  vain.  In  the  summer  of 
1892  the  security  holders'  committee  went 
to  Mr.  Morgan.  He  said  he  wouldn't  con 
sider  undertaking  the  task  unless  it  was 
committed  to  his  hands  unhampered  by  bar 
gains  made  for  the  benefit  of  particular  in 
terests.  This  condition  being  agreed  to,  his 
firm  made  an  examination  of  the  Richmond 
Terminal  properties  and  then  announced 
that  it  would  take  up  the  work  but  would 
"  demand,  in  view  of  the  unparalleled  diffi 
culties  and  complications,  protection  against 
any  single  interest  which  might  desire  to 
thwart  the  carrying  out  of  the  reorganisa 
tion,  and  insist  that  a  majority  of  each  class 
of  Terminal  securities  T)e  deposited  with 
them  at  the  beginning" — and  further  that 
all  litigation  should  be  under  control  of 


SPIRIT  OF  COMBINATION     231 

Drexel,  Morgan  &  Co.,  and  that  the  new  re 
ceivers  should  be  named  by  the  Morgan 
firm. 

At  such  conditions  the  security  holders, 
for  all  their  bad  plight,  professed  simple 
amazement;  they  felt  that  they  were  being 
asked  to  go  into  a  blind  pool  and  to  pledge 
themselves  in  advance  to  make  any  sacrifice 
that  might  be  demanded  of  them.  The 
thing  outraged  their  self-respect,  and  they 
refused  the  Morgan  offer,  tried  it  them 
selves  for  another  six  months,  and  then  came 
back  to  Mr.  Morgan  and  begged  him  to  take 
the  matter  up  at  once  upon  his  own  terms. 
Within  three  months  Morgan  and  Company 
made  public  a  very  voluminous  plan,  which 
resulted  in  the  creation  of  the  Southern 
Railway  Company.  It  provided  that  the 
new  company  should  be  capitalised  at  $375,- 
000,000  and  that  the  securities  of  railroads 
not  earning  interest  on  their  bonds  should 
be  exchanged  for  securities  of  the  new  cor 
poration  in  certain  proportions.  Twenty- 
two  railroads  with  their  bonds,  preferred 
stock,  common  stock  and  securities  of  the 
Terminal  company  were  each  to  receive  a 
proportion  of  the  new  five  per  cent,  bonds 


232        J.  PIERPONT  MORGAN 

and  new  preferred  and  common  stock.  In 
these  proportions  and  adjustments  lurked 
endless  possibilities  of  friction  between  the 
security  holders  and  the  plans  of  the  reor- 
ganisers — innumerable  excuses  for  rebellion 
or  the  revival  of  old  feuds.  But  Mr.  Mor 
gan,  as  we  have  seen,  had  placed  himself  in 
a  position  to  enforce  his  plans. 

There  is  no  better  instance  of  his  intense 
practicality  than  this,  that  however  flatter 
ing  were  the  appeals  from  the  distressed 
shareholders,  however  tempting  the  oppor 
tunity  of  stepping  in  from  the  outside  to 
take  charge  of  the  affairs  of  a  huge  system 
lof  railroads,  Mr.  Morgan  refused  to  move 
fan  inch  except  upon  conditions  of  his  own 
which  he  foresaw  would  make  the  way  clear. 
It  was  not  long  before  he  had  financiered 
away  the  existing  discrepancy  between  earn 
ings  and  outgo — a  three  million  dollar  deficit 
it  was,  in  point  of  fact — and  had  turned  a 
hopeless  ruin  into  the  system  now  known  as 
the  Southern  Railway.  The  Richmond  Ter 
minal,  with  its  annual  tale  of  horrors  in  the 
balance  sheet,  vanished,  and  the  Southern 
Railway  took  its  place.  The  Southern  was 


SPIRIT  OF  COMBINATION     233 

thus  added  to  the  list  of  roads — the  Read 
ing,  Northern  Pacific,  Erie,  Lehigh  Valley, 
and  a  dozen  others — which  Mr.  Morgan  fin 
anciered  out  of  a  tight  place  or  worse,  an< 
in  which  he  afterward  retained  control. 

All  credit  for  this  series  of  railroad  re 
habilitations  is  by  no  means  his  alone;  to 
one  of  his  partners — the  late  Charles  H. 
Coster — was  always  assigned  the  task  of 
solving  the  intricate  and  interwoven  rela 
tions  of  railroad  obligations,  bonds,  under 
lying  bonds,  collateral  trust  mortgages,  and 
every  other  artificial  form  of  securing  a 
loan — and  determining  the  amount  fairly 
represented  by  each.  Coster  was  a  kind  of 
rare  genius,  a  sort  of  financial  chemist,  and 
possessed  a  gift  of  analysis  in  this  new  and 
difficult  field;  it  often  happened,  when 
everyone  else  was  baffled,  that  he  alone  was 
able  to  lay  before  his  chief  solutions  clear 
and  sound,  which  made  it  possible  for  Mr. 
Morgan  to  go  ahead  with  his  plans  for  a  new 
structure.  These  operations  were  all  of  a 
new  kind,  following  naturally  upon  the  con 
solidation  of  the  numerous  railway  short 
lines  into  trunk  systems;  for  just  as  the 


234        J.  PIERPONT  MOEGAN 

roads  had  to  be  physically  unified  to  give 
effective  service,  so  the  capital  on  which 
they  were  based  had  first  to  be  consolidated 
in  a  more  or  less  loose  way,  and  afterwards, 
under  pressure  of  conditions,  had  to  be  re 
issued  on  a  sounder,  more  lastingly  work 
able  plan. 

J.  P.  Morgan's  sure  perception  of  the 
right  thing  to  do,  the  success  which  was  in 
evitably  coupled  with  his  appearance  in  an 
undertaking,   added  year  by  year  to   his 
unique  reputation  as  a  restorer  of  moribund 
properties  and  rescuer  of  securities  all  but 
ost.    With  him  it  very  soon  became  a  mat- 
;er  of  retaining  control,  or  a  voice  at  least, 
in  the  affairs  of  the  railroads  he  reorgan- 
sed,  to  prevent  further  mishaps  or  the  use 
)f  bad  judgment;  and  then  there  came  the 
lecessity  of  extending  that  control  to  still 
)ther  lines  which  might  become  competitors 
and  start  the  old  difficulties  afresh.     Thus 
it  came  about  that  before  the  world  in  gen 
eral  realised  what  was  going  on  Mr.  Morgan 
had  become  a  power  in  the  transportation 
business  to  an  extent  which,  expressed  in 
figures  of  mileage  and  capital,  was  to  an  old- 
fashioned  mind  simply  appalling. 


SPIRIT  OF  COMBINATION     235 


STEAM  KAILROADS  CONTROLLED  BY  <J.  P.  MORGAN,  1902 

Outstanding 
Mileage         capitalization 

*  Northern  Securities  Co $400,000,000 

Great  Northern  Railway  Sys 
tem  5,585  96,683,454 

Northern  Pacific  Railway 
System  5,664  177,925,789 

Chicago,  Burlington  &  Quincy 
Railway  8,479  362,357,300 

Southern  Railway,  with  de 
pendent  properties 8,929  355,484,309 

Central  of  Georgia 2,271  53,646,000 

Louisville  &  Nashville 6,174          165,784,660 

Reading,  with  Jersey  Cen 
tral,  and  Coal  &  Iron  Co.  .  2,131  297,067,290 

Erie    2,554          362,770,756 

Hocking  Valley   941  70,189,548 

Lehigh  Valley    1,399  94,012,100 

Atchison,  Topeka  &  Santa  Fe 

(with  Harriman)  7,919  445,235,240 

St.  Louis  &  San  Francisco 

(with  others)  3,507  121,593,125 

55,555     $3,002,949,571 

*The  "  Northern  Securities  Co.,"  which  held  the  stock  of 
the  Great  Northern,  Northern  Pacific  and  the  C.,  B.  &  Q., 
was  dissolved  by  the  Supreme  Court  in  1904. 

Mr.  Morgan  at  this  time  was  also  very  influential  in  sev 
eral  other  large  systems,  including  the  Vanderbilt  and  Penn 
sylvania  properties,  the  Atlantic  Coast  Line  and  Seaboard 
Air  Line.  Indeed,  there  was  no  railroad  system  of  major  im 
portance  in  which  he  was  not,  to  a  greater  or  less  extent,  a 
factor. 


236        J.  PIERPONT  MORGAN 

The  method  of  control  varied;  sometimes 
me  retained  a  percentage  of  the  stock ;  some- 
/  times  he  put  the  railroad  into  a  voting  trust, 
/  which  means   that   the   stockholders   were 
/  induced  to  transfer  to  a  board  of  trustees 
/    the  right  to  vote  their  stock ;  or  he  was  sim- 
I    ply  a  director;  or,  simpler  still,  he  merely 
1    exercised  his  influence  upon  the  powers  in 
*  tangible  control.     To  this  kind  of  master 
ship  there  is,  in  one  way  of  looking  at  it, 
a  beginning,  perhaps,  but  no  end — no  de 
finable  limits.     It  appeals  to  the  imagina 
tion,   and  may  easily  set  the  imagination 
wandering  far ;  for  it  presents  you  with  the 
Idea  of  an  immense,  potent,  and  invisible 
nand  thrust  into  the  blind  confusedness  of 
practical  affairs,  turning  everything  in  a 
new  direction,  and  setting  things  going  on 
a  new,  profitable  basis.     The  new  basis  is 
yet  primitive  and  little  understood.     The 
business  of  the  country  was  built  up  on  the 
principle  of  competition,  but  the  time  came 
when  that  principle  proved  impracticable 
as  applied  to  great  masses  of  capital  in 
vested  in  machinery,  rolling  stock  or  road- 
f  beds.     Thus  the  idea  of  combination  was  a 


SPIRIT  OF  COMBINATION     237 

life-saver  for  American  industry.  That  it  / 
was  from  this  point  of  view  a  public  benefit 
is  undeniable,  but  that  it  has  proved  a  public 
benefit  from  every  point  of  view  or  in  all 
the  ramifications  and  details  no  one  can 
think.  The  practice  of  combination  which 
has  been  imposed  upon  the  public  by  powers 
like  Mr.  Morgan  was  also  clearly  imposed 
upon  them  by  the  sternest  necessity. 

When  J.  P.  Morgan  was  a  boy  at  Hart 
ford,  Connecticut,  a  railroad  was  con 
structed  from  Springfield  to  New  Haven, 
passing  through  Hartford,  chiefly  for  the 
purpose  of  making  connection  with  the 
steamboat  lines  running  between  New  Haven 
and  New  York.  His  father  was  greatly 
interested  in  this  railway,  and  helped  to 
finance  it — that  is  the  tradition.  At  least 
ten  years  later  the  construction  of  the  New 
York  &  New  Haven  Railroad  Company  was 
begun ;  and  five  years  earlier,  a  railway  line 
had  been  built  from  Worcester,  Mass.,  to 
Norwich,  Conn.,  for  the  purpose  of  facili 
tating  passenger  and  freight  traffic  between 
Boston  and  New  York.  Between  1833  and 
1872  was  the  era  of  great  railway  construe- 


238        J.  PIERPONT  MORGAN 

tion  throughout  New  England.  The  first 
important  consolidation  took  place  in  1872, 
when  the  New  York  &  New  Haven  and  the 
New  Haven,  Hartford  &  Springfield  rail 
way  companies  were  combined.  Mr.  Mor 
gan  took  no  active  part  in  this  consolidation, 
but  he  told  William  C.  Bishop,  whose  father 
built  the  New  York  &  New  Haven  railroad, 
and  who  himself  worked  out  the  plan  of 
consolidation  of  the  two  railroads  and  who 
became  president  of  the  consolidated  rail 
road — that  he  believed  in  the  plan  thor 
oughly. 

Bishop  became  a  member  of  the  Con 
necticut  Legislature  in  1872,  so  that  he 
might  be  in  better  position  to  urge  the  pass 
ing  of  a  charter  which  would  permit  the 
consolidation  of  these  two  railroads.  At 
that  time  the  Morgan  name,  though  little 
known  elsewhere  in  the  country,  had  weight 
in  Hartford,  and  Bishop  said  in  an  inter 
view:  "Mr.  Morgan  believes  that  the  New 
Haven  Railway  System,  which  has  termi 
nals  in  New  York  City,  should  concentrate 
its  efforts  upon  securing  an  independent  en 
trance  into  Boston.  Boston  and  New  York 


SPIRIT  OF  COMBINATION     239 

should  be  connected  by  a  single  railway  line 
under  one  direction. ' ' 

At  that  time,  the  New  Haven  Railroad 
was  compelled  to  enter  Boston,  or  to  re 
ceive  passengers  at  Springfield  from  Bos 
ton,  by  means  of  a  traffic  agreement  with  the 
Boston  &  Albany  Railway  system.  Soon 
after  Mr.  Morgan  became  a  director  of  the 
New  Haven,  its  management  began  to  seek 
an  independent  entrance  to  Boston,  through 
the  purchase  or  control  of  a  railroad  stretch 
ing  from  Boston  southwesterly. 

At  this  juncture  Archibald  McLeod  be 
gan  his  astonishing  campaign  for  the  ex 
tension  of  the  Reading,  of  which  he  was 
President,  into  and  across  New  England, 
intending  to  secure  an  independent  entrance 
for  the  Reading  at  Boston.  McLeod  pro 
posed  to  carry  his  road  by  means  of  the  rail 
road  bridge  at  Poughkeepsie,  over  the 
Hudson,  and  then,  through  the  control  of 
the  old  New  York  &  New  England  railway 
property,  to  gain  an  independent  entrance 
to  Boston.  He  descended  upon  the  Old 
Colony  Railroad  system,  which  covered  all 
of  Southeastern  Massachusetts,  and  reached 


240        J.  PIEBPONT  MORGAN 

as  far  as  New  London,  Conn.  This  strug 
gle  for  the  control  of  the  Old  Colony  has 
become  traditional  in  railway  annals.  In 
all  probability,  President  McLeod  would 
have  won  the  fight  if  he  had  not  had  for  an 
enemy  J.  P.  Morgan,  who  had  been  work 
ing  on  that  idea  along  different  lines  for 
twenty  years. 

Mr.  Morgan  notified  men  of  capital  in 
Philadelphia  that  they  must  not  expect  to 
maintain  friendship  with  him  if  they  con 
tinued  to  help  McLeod  finance  his  railroad 
project  in  New  England.  That  was  a  hint 
sufficient.  McLeod  's  money  supply  failed 
from  the  moment  that  hint  was  received. 
His  New  England  railway  plans  collapsed; 
and,  in  a  little  while,  under  Mr.  Morgan's 
leadership,  the  Old  Colony  system  passed 
into  the  possession  of  the  New  Haven. 
That  gave  the  New  York  &  New  Haven  a 
through  independent  railway  line  operating 
between  New  York  and  Boston  ;  and  the  sec 
ond  very  important  step  toward  the  com 
bination  of  the  railway  interests  in  New 
England  into  one  dominating  system  was 
then  taken. 

The  New  Haven  then  purchased  or  leased 


a- 


SPIRIT  OF  COMBINATION     245 

treasury,  then  the  officers  of  the  company 
should  see  to  it  that  money  is  obtained. 

Mr.  Morgan's  sense  of  personal  respon 
sibility  for  institutions  that  had  come  to  be 
identified  with  his  name  or  the  name  of  his 
banking  house  has  always  been  very  strong, 
and  points  to  a  trait  of  character  which  in 
him  is  perhaps  the  most  marked  of  all — his 
unmeasured  loyalty  to  his  word,  a  prin 
ciple  which  is  fully  as  active  within  him 
when  the  obligation  is  scarcely  more  than 
a  reflection  of  the  glamour  of  the  Morgan 
name  as  when  it  is  set  down  in  the  hard 
core  of  an  agreement.  He  explained  his 
own  feeling  about  these  matters  in  one  of 
the  longest  speeches  of  his  life,  when  he  was 
questioned  on  the  witness  stand  in  the 
course  of  an  inquiry  into  the  Northern  Pa 
cific  corner  in  Wall  Street  in  May,  1901. 

The  circumstances  may  be  recalled:  E. 
H.  Harriman,  having  built  up  in  a  few  years 
his  tremendous  railroad  monopoly  in  the 
Southwest,  went  after  James  J.  Hill  and 
tried  to  induce  him  to  fuse  the  interests  of 
the  Great  Northern  and  the  Northern  Pa 
cific  with  the  Harriman  lines.  When  Hill 
refused,  Harriman,  with  one  of  his  char- 


246        J.  PIERPONT  MORGAN 

acteristic  and  startling  decisions,  immedi 
ately  set  out  to  buy  control  of  the  Northern 
Pacific.  Mr.  Morgan  had  just  completed 
the  organisation  of  the  Steel  Corporation 
and  had  sailed  away  to  Europe ;  he  and  Hill 
and  their  friends  held  between  them  about 
forty  millions  of  Northern  Pacific  common 
stock.  As  Harriman  bought  the  stock  went 
up,  higher  and  higher,  and  the  Morgan 
party  let  go  a  considerable  block  of  theirs 
before  the  slightest  suspicion  came  to  them 
concerning  the  cause  of  this  mysterious  rise 
in  value.  After  the  event  it  is  hard  to  un 
derstand  how  Morgan  and  Company  were 
kept  so  long  in  the  dark,  for  to  lose  the  con 
trol  of  the  road  to  Harriman  was  the  last 
thing  they  were  willing  to  do. 

The  moment  they  realised  their  position 
their  sales  of  stock  stopped  short  and  the  la 
conic  cable  come  from  Mr.  Morgan  at  Aix- 
les-Bains — "Buy  150,000  shares  Northern 
Pacific," — an  order  which  exploded  a  panic. 
This  is  what  Mr.  Morgan  said  about  it: 

"When  I  heard  of  it,  I  felt  in  this  po 
sition:  We  had  organised  the  Northern 
Pacific,  we  had  placed  all  the  securities  of 
the  Northern  Pacific,  and  I  knew,  as  I  had 


SPIRIT  OF  COMBINATION     247 

always  supposed,  that  there  were  people, 
friends  of  ours  and  other  people,  who  prac 
tically  held  enough  Northern  Pacific — we 
had  always  supposed  we  had  with  us  people 
upon  whom  wre  could  depend  to  protect  our 
moral  control  of  the  property.  And  conse 
quently  when  that  news  came  to  me,  I  hadn  't 
any  doubt  about  the  fact  of  the  matter. 
And  at  the  same  time  the  news  came  so 
strong — whoever  had  acquired  it — I  felt 
something  must  have  happened.  Somebody 
must  have  sold.  I  knew  where  certain 
stocks  were  and  I  figured  it  up. 

"I  feel  bound  in  honour  when  I  reor 
ganise  a  property  and  am  morally  respon 
sible  for  its  management,  to  protect  it, — and 
I  generally  do  protect  it.  So  I  made  up 
my  mind  that  it  would  be  desirable  to 
buy  150,000  shares  of  stock,  and  with  that 
I  knew  we  had  a  majority  of  the  common 
stock;  and  I  knew  that  actually  gave  us 
control,  and  they  couldn't  take  the  minority 
and  have  it  sacrificed  to  Union  Pacific  in 
terests. 

"Mr.  John  S.  Kennedy  has  been  a  friend 
of  mine  for  forty  years.  He  and  I  were 
in  Aix  together.  He  came  down  to  see 


248        J.  PIERPONT  MORGAN 

what  in  the  mischief  all  this  meant.  I  said 
I  didn't  know,  and  he  said,  ' Whatever  you 
want  done  I  want  done  with  my  Northern 
Pacific.'  And  that  is  the  way  people 
treated  me  in  the  Northern  Pacific.  What 
ever  I  was  willing  to  do  they  wanted,  and 
they  wanted  to  put  the  stock  just  where  I 
said  it  would  be  safe.  That  was  what  they 
wanted.  Well,  I  appreciated  that ;  I  cannot 
help  being  touched  by  a  thing  of  that  kind." 
On  the  receipt  of  J.  P.  Morgan's  cable 
his  firm  engaged  "Jim"  Keene,  the  one 
time  free-lance  operator  of  the  San  Fran 
cisco  stock  market,  and  now  the  most  fa 
mous  manipulator  in  New  York,  to  get  the 
shares  for  them  in  the  market.  The  com 
petitive  buying  soon  sent  the  price  of 
Northern  Pacific  common  out  of  reach  in  a 
market  where  all  were  buyers  and  none 
sellers;  dozens  of  brokerage  houses  were 
caught  by  the  peculiar  pyrotechnics  of  that 
stock,  which  no  wisdom  could  have  foreseen, 
and  owing  thousands  of  shares  which  they 
had  sold  but  could  not  buy  to  deliver — the 
price  went  to  a  thousand  dollars  a  share — 
they  stood  on  the  verge  of  bankruptcy. 
May  9th  saw  a  curious  and  terrible  state  of 


SPIRIT  OF  COMBINATION     249 

affairs  on  the  Stock  Exchange ;  the  extraor 
dinary  need  for  cash,  for  four  or  five  days 
past,  had  steadily  forced  the  sale  of  all  kinds 
of  stock  except  "N.  P.,'7  and  now  the  selling 
movement  suddenly  became  a  deluge  which 
swept  all  values  madly  downward.  So  many 
shares  were  sold  that  it  was  impossible  to 
keep  track  of  them  all,  while  above  this 
ghastly  confusion  and  wreckage,  balloon 
high,  hung  the  perfidious  cause  of  it  all— 
the  stock  which  no  one  could  buy. 

Then  in  some  haste  the  antagonists  came 
to  an  agreement ;  Morgan  &  Co.  met  Harri- 
man's  financial  backers,  the  firm  of  Kuhn, 
Loeb  &  Co.,  and  agreed  to  end  the  tragic  sit 
uation.  Harriman's  attempt  failed,  and  of 
the  new  company  that  was  then  formed,  the 
Northern  Securities  Company,  Mr.  Morgan 
named  the  directors.  The  Northern  Se 
curities  Company  was  planned  by  Morgan 
himself  to  take  care  of  Northern  Pacific 
and  the  Great  Northern,  and  assure  the  con 
trol  of  these  railroads  to  the  present  holders 
of  the  stock  for  future  time.  "I  wanted," 
said  Mr.  Morgan,  "to  put  it  in  a  company 
with  a  capital  large  enough  so  that  nobody 
could  ever  buy  it."  But  the  Supreme 


250        J.  PIERPONT  MORGAN 

Court  called  it  a  violation  of  the  anti-trust 
law  and  dissolved  the  company,  and  the  con 
trol  was  dealt  out  otherwise. 

The  very  next  year  Mr.  Morgan  was  forced 
to  bestir  himself  to  protect  another  prop 
erty,  and  it  cost  him  something.  John  W. 
Gates,  with  a  number  of  his  speculative 
friends,  succeeded  in  buying  a  majority  of 
the  stock  of  the  Louisville  &  Nashville  Rail 
way.  Convinced  that  Gates  had  bought  the 
road  merely  as  a  speculation  and  without 
any  intention  to  manage  it,  and  that  there 
was  no  telling  what  he  might  do  to  demor 
alise  the  Southern  Railway  system,  Mr. 
Morgan  sent  his  partner,  George  W. 
Perkins,  to  see  Gates  and  buy  the  L.  &  N. 
from  him  at  once.  It  happened  to  be  some 
time  after  midnight  when  this  decision  was 
reached,  and  was,  in  fact,  about  three  in 
the  morning  when  Perkins  got  Mr.  Gates 
out  of  his  bed  at  the  Waldorf. 

The  former  Wire  King  had  no  benev 
olent  feelings  toward  Morgan  &  Co. — the 
year  before  Mr.  Morgan  had  firmly  elim 
inated  him  from  the  management  of  the 
Steel  Trust — and  he  now  remarked  coolly 
to  Perkins:  " Since  you  want  that  stock 


SPIRIT  OP  COMBINATION     251 

so  badly,  to  keep  your  friends  in  control  and 
protect  the  Southern,  I  will  let  you  have  it. 
But  you  must  pay  me  ten  millions  more 
than  it  cost." 

And  the  deal  was  closed  on  that  basis. 

The  enterprises  Mr.  Morgan  controls  are 
not  merely  the  strongest  and  most  ably 
planned  of  the  modern  combinations; 
usually  they  possess  some  special  advantage 
or  element  of  security  outside  of  mere  ability 
in  management,  which  enables  them  to  pull 
through  in  the  worst  of  times,  and  makes 
them  pretty  certain  inheritors  of  future 
business.  They  are  apt  to  have  an  element 
of  advantage  which  prevents  them  from 
ever  becoming  the  victims  of  deadly  compe 
tition.  The  Steel  Corporation  controls  un 
measured  sources  of  supply  of  raw  material ; 
its  competitors  control  very  little ;  the  thou 
sands  of  miles  of  railroad  Mr.  Morgan  is 
identified  with  control  rights  of  way,  coal 
lands,  terminals,  competing  lines,  steamship 
connections  and  so  on. 


CHAPTER  XII 

A  PEEIOD   OF   REACTION 

AS  early  as  1893,  Mr.  Morgan's  atten 
tion  was  called  to  the  demoralised 
condition  of  the  ocean-carrying  steamship 
companies,  due  very  largely  to  excessive 
competition.  There  were  any  number  of 
tramp  steamships  which  offered  to  carry 
ocean-going  freight,  at  rates  much  less  than 
those  which  were  necessary  for  the  incor 
porated  steamship  companies  to  maintain, 
if  they  were  to  pay  operating  expenses, 
fixed  charges  and  fair  dividends  upon  the 
capital. 

This  demoralisation  continued  until  at 
last  it  was  seen  that  something  must  be 
done,  or  else  liquidation,  and  bankruptcy, 
would  be  the  fate  of  some  of  the  weaker 
incorporated  steamship  companies.  It  had 
long  been  the  hope  of  American  trunk  line 
railway  managers  to  see  an  American  line 
plying  between  some  one  of  the  Atlantic 

252 


SPIRIT  OP  COMBINATION     241 

every  railway  line  in  Connecticut,  excepting 
one,  the  Central  Vermont;  every  railway 
line  in  Rhode  Island;  everyone  in  Massa 
chusetts  south  of  Boston  and  the  Boston  & 
Albany  railroad;  and,  in  addition,  the 
steamboat  lines  connecting  Boston  and  New 
York  were  financed  into  the  possession  of 
the  New  Haven  system.  "Within  a  year,  the 
great  Boston  &  Maine  Railway  system 
passed  into  the  control  of  the  New  Haven. 
Furthermore,  largely  through  the  efforts  of 
Mr.  Morgan,  the  Boston  &  Albany  railway, 
which  had  been  leased  by  the  New  York 
Central,  entered  into  cooperative  arrange 
ments  with  the  New  Haven,  and  within  a 
few  months,  the  Rutland  Railway  system, 
which  was  owned  by  the  New  York  Central, 
passed,  with  the  consent  of  the  New  York 
Central,  into  the  New  Haven  Railroad  fam 
ily,  although  the  New  York  Central  still 
retains  half  ownership  of  the  Rutland 
Road. 

Charles  S.  Mellen,  President  of  the  New 
York,  New  Haven  &  Hartford  and  of  the 
Boston  &  Maine,  has  made  official  and  au 
thoritative  declaration  of  the  purpose  of  the 
New  Haven  Railroad  management,  when 


242        J.  PIERPONT  MORGAN 

it  began  the  merger  process  which  has 
brought  practically  all  of  New  England 
under  the  domination  of  the  New  Haven 
Railroad  system.  Said  Mr.  Mellen : 

"  Wisely  or  otherwise,  the  railroads  of 
New  England  have  come  together,  and 
should  work  hereafter  as  a  unit  for  the 
fullest  development  of  all  that  appertains 
to  the  welfare  of  New  England." 

All  this  combination  and  cooperation  has 
made  it  possible  to  develop  to  their  fullest 
capacity,  the  superb  commercial  opportuni 
ties  which  Boston  has.  Within  a  short 
time,  the  New  Haven  system  will  have  en 
tered  into  such  arrangements  with  the  Cana 
dian  Pacific,  utilising  the  Rutland  Railroad 
chiefly  for  that  purpose,  as  will  make  Bos 
ton  the  all-the-year  Atlantic  terminal  of  the 
Canadian  Pacific.  This  possibility  would 
never  have  appeared  on  the  horizon  so  long 
as  New  England  was  covered  by  a  large 
number  of  small  independent  railroads. 

If  there  were  no  other  way  of  identifying 
J.  P.  Morgan  with  the  new  development  of 
the  transportation  systems,  land  and  water, 
of  New  England,  the  use  of  the  word  "unit" 
by  President  Mellen  would  be  sufficient.  It 


SPIRIT  OF  COMBINATION     243 

is  a  striking  demonstration  of  what  Mr.  Mor 
gan  believes  the  economic  principle  of  the 
present  era,  namely :  the  elimination  of  small 
and  independent  units,  and  the  perfecting 
of  very  large  units  into  which  these  smaller 
ones  can  be  absorbed.  Many  of  the  railway 
combinations  have  been  along  the  parallels 
of  latitude,  like  that  represented  by  the  New 
York  Central  and  the  Union  Pacific ;  or  else 
along  parallels  of  longtitude,  like  the  vari 
ous  railway  systems  of  the  South,  and  the 
Illinois  Central  Railway  system.  But  the 
New  England  combination  covers  all  points 
of  the  compass.  Standing  at  a  centre  like 
Springfield  or  Worcester,  you  could  practi 
cally  box  the  railway  compass  of  New  Eng 
land,  and  find  that  within  that  compass  was 
included  almost  exclusively  the  New  Haven 
Railway  system. 

Not  bearing  on  this  particular  point,  but 
interesting  on  its  own  account,  is  what  he 
said  when  he  began  his  service  as  a  director 
of  that  system.  There  was  a  meeting  of 
the  board  at  the  old  Grand  Central  Station. 
Mr.  Morgan  entered  the  room,  and  took  his 
place  at  the  foot  of  the  table.  He  greeted 
pleasantly  and  informally  all  the  members 


244        J.  PIERPONT  MORGAN 

of  the  board;  but  lie  said  nothing.  He  lis 
tened  intently  to  the  business  as  it  came  be 
fore  the  board,  remaining  taciturn.  When 
this  business  was  ended,  the  President,  turn 
ing  to  Mr.  Morgan,  said : 

"Mr.  Morgan,  I  am  sure  that  the  board 
would  be  very  glad  to  hear  from  you,  and 
would  be  especially  pleased  if  you  have  any 
suggestions  to  make." 

Thus  invited,  Mr.  Morgan  arose,  and 
said: 

"There  is  just  one  thing  I  would  like 
to  say.  I  have  been  told  that  you  are  very 
slow  about  paying  your  just  bills.  I  hear 
that  some  of  your  creditors  have  been  held 
up,  or  staved  off,  sometimes  as  long  as  six 
months.  Now  I  think  this  railroad  ought 
to  pay  its  just  bills  as  soon  as  they  are 
due;  and,  if  you  haven't  the  ready  money 
in  hand  to  pay  them,  I  will  advance  the 
money." 

Having  said  this,  he  sat  down,  and  the 
meeting  adjourned.  Mr.  Morgan  has  al 
ways  insisted  that  in  any  institution  he  was 
connected  with,  just  bills  should  be  paid  at 
the  time  agreed  upon;  and,  if  it  should  be 
inconvenient  to  do  that  out  of  the  company's 


A  PERIOD  OF  REACTION      253 

ports,  either  New  York  or  Philadelphia, 
and  Great  Britain.  That  desire  led  to  the 
organisation  of  the  American  Steamship 
Company,  which  was  sponsored  in  part  by 
the  railway  capital  or  influence  of  the 
Pennsylvania.  But  the  American  Line 
was  not  very  successful,  and  at  one 
time  it  seemed  likely  that  it  would  be  com 
pelled  to  go  out  of  business. 

Shortly  after  the  amazingly  successful 
organisation  of  the  United  States  Steel 
Corporation  Mr.  Morgan,  while  on  his  way 
to  Europe,  was  bluntly  asked  by  a  man  of 
steamship  capital,  if  it  would  be  possible 
to  bring  the  various  North  Atlantic  steam 
ship  lines  under  one  management  and  prac 
tically  one  ownership.  Mr.  Morgan's  re 
ply  was:  "It  ought  to  be."  He  was  as 
laconic  as  ever.  But  the  notion,  if  it  were 
not  already  in  his  mind,  gained  foothold 
there,  while  he  was  upon  this  ocean  trip. 

He  at  once  saw,  however,  that  in  many 
of  its  features,  an  ocean  steamship  combina 
tion  would  necessarily  differ  from  those 
characteristic  of  the  United  States  Steel 
Corporation's  organisation.  All  of  the 
corporations  which  came  into  the  United 


254        J.  PIERPONT  MORGAN 

States  Steel  Corporation  were  American- 
chartered  institutions;  all  were  operated  in 
the  United  States  and  were  subject  to  State 
and  Federal  laws;  but,  if  there  were  to  be 
an  ocean  steamship  corporation,  it  would 
involve  the  creating  of  a  powerful  combina 
tion,  through  the  assimilation  of  corpora 
tions  flying  the  British  flag,  and  probably 
the  flags  of  some  of  the  Continental  nations, 
as  well  as  steamship  companies  chartered  in 
the  United  States.  That  would  be  an  inter 
national  corporation,  and  the  first  one  of 
its  kind  ever  proposed.  There  had  been 
many  attempts  to  secure  international  trade 
agreements  between  manufacturers  of  like 
products;  but  none  to  incorporate  under 
one  authority  companies  chartered  both  by 
Great  Britain  and  the  United  States. 

Accordingly,  Mr.  Morgan  set  counsel  to 
learn  whether  anything  in  our  own  laws 
prevented  a  combination  which  would  ab 
sorb  American  steamship  companies  with 
those  chartered  in  Great  Britain  or  Europe. 
The  investigation  did  not  require  much 
time.  It  showed  that  no  obstacle  in  the  law 
stood  in  the  way  of  perfecting  an  ocean 
steamship  combination.  There  was  no 


A  PERIOD  OF  REACTION      255 

question  about  the  right  and  the  ability  of 
steamship  corporations  chartered  by  Great 
Britain  to  be  absorbed  by  one  great  sup 
porting  company.  The  amount  of  money 
necessary  for  financing  a  proposition  of 
that  kind,  or  the  aggregate  financial  prop 
osition,  did  not  compare  in  magnitude  with 
the  vast  sum  represented  by  the  organisa 
tion  of  the  United  States  Steel  Corpora 
tion. 

Early  in  the  summer  of  1903,  the  plan 
of  the  steamship  combination  was  so  far 
along  that  it  was  possible  to  obtain  a 
charter.  The  proposition  involved  the  own 
ership  by  a  new  company  of  the  entire  cap 
ital  stock  of  the  White  Star  Line,  Atlantic 
Transport  Company,  International  Nav 
igation  Company,  of  the  American  and  Red 
Star  Lines,  the  Mississippi  &  Dominion 
Steamship  Company,  of  the  Dominion 
Line,  whose  steamships  made  their  Ameri 
can  Terminal  at  Boston;  of  the  Leyland 
Line,  and  of  the  National  Steamship  Com 
pany,  this  company  being  naturally  in  the 
ownership  of  the  Atlantic  Transport  Com 
pany. 

To  be  successful,  a  combination  of  this 


256        J.  PIERPONT  MORGAN 

kind  must  include  many  distinct  services. 
It  would  have  to  include  service  from  New 
York,  Boston,  Philadelphia,  New  Orleans, 
Baltimore,  Galveston,  in  the  United  States, 
Montreal  in  Canada,  Liverpool,  Southamp 
ton,  London,  Cherbourg,  Antwerp,  and 
ought  also  to  operate  from  British  ports 
and  Australia,  and  further  operate  in  ports 
of  the  Mediterranean,  the  West  Indies  and 
Mexico.  The  attempt  was  never  seriously 
made  to  bring  the  Cunard  Company,  which 
was  the  original  steamship  company  between 
Europe  and  the  United  States,  into  the 
combination,  for  it  was  apparent  from  the 
beginning  that  the  British  Government 
would  never  permit  anything  of  the  kind. 
The  corporation  was  incorporated  under 
the  name  of  the  International  Mercantile 
Marine  Company.  It  was  immediately 
dubbed  the  North  Atlantic  Steamship 
Trust. 

The  amount  of  money  to  be  provided  was 
not,  according  to  the  modern  view,  very 
large.  The  company  was  authorised  to 
capitalise  on  the  basis  of  sixty  millions  com 
mon,  and  sixty  millions  preferred  stock.  A 
voting  trust  agreement  was  also  provided, 


A  PERIOD  OF  REACTION      273 

would  send  out  to  the  curb  and  buy  a  block 
of  fifty,  and  at  the  same  time  put  in  fifty  of 
the  pool  shares  at  the  same  price;  which 
had  the  double  and  desirable  effect  of  creat 
ing  a  business  in  the  stock,  and  at  the  same 
time  of  working  off  the  heavy  holdings  of 
the  pool.  Schwab  suggested  to  Gates  that 
as  the  syndicate  managers,  namely  Morgan 
&  Co.,  had  treated  him  very  "white"  in  this 
whole  matter,  it  would  be  "a  nice  thing  to 
do"  to  include  their  stock — the  stock  he  had 
turned  over  to  them  in  lieu  of  interest 
money,  etc. — in  the  pool  agreement.  The 
name  of  J.  P.  Morgan  &  Co.  was  inserted  in 
the  paper  with  the  expectation  that  Morgan 
wrould  sign  it.  This  offer  was  taken  to  the 
Morgan  office,  and  when  read  by  his  part 
ners — Mr.  Morgan  was  in  Europe  at  that 
time — was  rejected  positively.  The  firm 
would  have  nothing  to  do  with  such  a  bar 
gain. 

As  no  one  would  buy  the  stock  anyhow, 
this  pool  agreement  never  got  beyond  the 
paper  stage;  but  when  fetched  forth  at  the 
post  mortem  of  the  shipbuilding  combina 
tion  it  was  used  with  sensational  ef 
fect,  both  b}7  the  newspapers  and  by 


274        J.  PIERPONT  MOEGAN 

the  bear  clique,  which  at  that  time  was 
pounding  at  the  price  of  Steel  stock  and  de 
claring  that  all  that  had  happened  to  the 
United  States  Shipbuilding  combination 
would  happen  likewise  to  United  States 
Steel.  Mr.  Morgan  was  urged  again  and 
again  to  make  a  public  statement,  defend 
ing  himself  and  setting  forth  all  the  facts 
of  the  shipbuilding  matter  as  far  as  Morgan 
&  Co.  were  concerned.  He  always  refused, 
saying,  very  characteristically,  that  none  of 
the  members  of  the  steel  syndicate  had 
asked  him  to  answer  any  questions  or  to 
give  an  explanation  of  any  sort.  To  his 
mind  they  were  the  only  ones  who  had  the 
right  to  question  him — and  they  were  sat 
isfied. 

Here  this  chapter  on  the  spirit  of  com 
bination  as  the  backbone  of  Mr.  Morgan's 
business  life  may  well  end.  He  began  by 
reorganising  railroads  which  had  fallen  into 
dire  straits  financially;  then  he  went  on 
from  this  point  and  combined  small  and 
comparatively  weak  railway  units  into  units 
big  and  powerful;  and  then  he  applied  the 
same  methods  to  manufacturing  industries. 


A  PERIOD  OF  REACTION      275 

In  all  these  operations  the  business  motive 
and  aim  was  to  create  institutions  which 
would  find  a  ready  sale  for  their  stock,  and 
permanent  value  in  the  same.  The  elmina- 
tion  of  competition,  of  which  so  much  has 
been  said,  almost  invariably  placed  his  com 
bination  on  a  stable  and  prosperous  footing ; 
another  side,  which  is  of  great  importance  in 
dealing  with  this  movement,  is  that  while 
the  stock  of  small  individual  industries, 
however  prosperous  they  were,  could  have 
only  a  local  sale,  a  sort  of  neighbourhood 
market,  the  moment  they  were  brought  to 
gether  and  given  a  name  to  be  known  all 
over  the  nation,  the  stock  of  the  new  com 
pany  could  be  offered,  and  would  be  taken 
up,  far  and  wide.  It  is  clear  that  this  move 
ment  toward  combination  finds  its  lease  of 
life  in  this  latter  condition  of  affairs.  In 
other  words,  if  these  giant  organisations 
are  mismanaged  or  abused  by  those  in  con 
trol,  or  if  they  were  not  in  the  beginning 
well  conceived  and  organised,  their  securi 
ties  will  fall  off  in  value  until  their  dis 
integration  into  the  original  units  becomes 
the  one  desirable  and  business-like  thing  to 


276        J.  PIERPONT  MORGAN 

effect.  That  would  be  the  work  of  a  man 
proceeding  in  a  direction  exactly  the  reverse 
of  Mr.  Morgan's. 

In  the  past  twenty  years  we  have  seen 
many  kinds  of  men  at  work  in  the  field  of 
changing  conditions,  some  building  up  in 
stitutions  like  the  Standard  Oil  or  the 
Woollen  Trust  as  a  means  of  making  and 
keeping  an  enormous  personal  fortune; 
others,  opportunists,  dipping  in  and  getting 
out  whenever  they  see  the  vision  of  a  pos 
sible  " clean-up";  but  Mr.  Morgan  in  his 
long  life  has  not  been  a  simple  fortune- 
maker  of  either  class — he  has  been  the  maker 
of  industries,  the  consistent  agent  of  solid 
business  conditions.  Yet  there  are  many 
who  distrust  what  they  call  the  "Morganisa- 
tion"  of  industry,  with  their  eyes  fastened 
upon  the  social  flaws  inherent  in  these  same 
wonderful  organisations  of  his. 

In  writing  this  life  the  author  would 
not  for  one  moment  belittle,  by  ignoring  it, 
the  force  of  this  point  of  view.  But  if 
wholesome  and  right,  it  is  also  vague  and 
aspiring,  and  would  bring  only  confusion  to 
the  simple  task  of  setting  down  here  the 
events  of  J.  P.  Morgan's  life.  Nothing  is 


A  PERIOD  OF  REACTION      277 

to  be  gained  by  ascribing  to  a  man  aims 
which  he  never  possessed,  or  by  forcing  the 
lack  of  such  aims  as  an  issue  against  him. 
To  write  his  life  from  a  sharp  "uplift" 
angle  would  be  to  produce  an  unreal  and 
senseless  image,  containing  few  features  of 
the  man  himself.  When  this  point  of  view 
shall  be  embodied  in  a  set  of  changes  it  will 
then  undoubtedly  furnish  a  luminous  com 
parison  with  present  conditions  to  show  how 
crude,  relatively,  and  in  the  rough  they  are. 


CHAPTER  XIII 

WOKLD  BANKING 

rilHE  leadership  of  J.  P.  Morgan  con- 
JL  ducted  the  United  States  into  the  field 
of  international  financing.  The  real  test  of 
the  ability  of  a  nation  to  rank  itself  with  the 
great  money  powers  of  the  world  is  fully 
met  when  its  bankers  become  the  creditors 
of  another  nation.  When  the  Rothschilds 
or  the  Baring  Brothers  underwrite  a  for 
eign  national  loan,  then,  through  that  action, 
they  make  the  nation  of  which  they  are  citi 
zens  to  a  greater  or  less  extent  a  world 
money  power.  Before  the  beginning  of  the 
twentieth  century  the  United  States  never 
entered  into  relations  of  this  kind;  always 
this  country  had  been  the  debtor  of  other 
nations.  But  the  immense  accumulation  of 
capital  seeking  investment,  and  the  intimate 
relations  which  were  being  established  be 
tween  American  and  European  bankers- 
together  with  convincing  proof  that  the 

278 


WORLD  BANKING  279 

prosperity  of  the  country  was  now  assured 
— made  it  possible  for  American  bankers 
like  Mr.  Morgan  to  undertake  the  making 
of  foreign  loans. 

In  other  words  this  country,  which  for 
fifty  years  had  held  out  its  hands  to  the 
world  for  money  with  which  to  develop  its 
great  industries,  reached  the  position  a  lit 
tle  more  than  ten  years  ago  where  it  had 
a  superfluity  of  its  own  to  dispose  of  in  fi 
nancing  the  needs  of  other  countries. 

The  first  foreign  loan  ever  negotiated  in 
this  country  was  made  through  Morgan  and 
Company  to  the  Republic  of  Mexico  in  the 
year  1899.  Mexico  entered  the  market  with 
a  proposition  for  a  sale  of  national  bonds,  the 
chief  purpose  of  which  was  to  refund  earlier 
national  obligations,  and  Mr.  Morgan  and 
his  associates  speedily  came  to  terms  with 
the  Mexican  Government  and  underwrote 
the  entire  issue.  The  matter  attracted  less 
attention  than  was  its  due,  considering  the 
significance  of  such  an  event  in  the  life  of 
this  country.  But  the  loan  itself  was  not 
large,  and  there  were  already  in  Mexican 
railroads  and  mines  vast  amounts  of  Ameri 
can  money. 


280        J.  PIERPONT  MORGAN 

Two  years  later,  England  came  seeking  a 
loan.  Now,  it  was  English  money  which 
built  our  railroads;  for  half  a  century 
American  business  had  been  almost  de 
pendent  upon  supplies  of  English  capital; 
our  government  bond  issues,  although  they 
were  financed  in  New  York  and  Philadel 
phia,  had  eventually  been  sold  in  great 
quantities  throughout  Great  Britain.  Con 
sequently  it  meant  much  to  our  national 
pride  of  position  to  turn  the  tables  on  the 
mother  country — to  have  money  to  lend 
where  we  had  always  been  accustomed  to 
borrow  or  receive.  Mr.  Morgan  was  in  Lon 
don  when  the  British  Government  started 
out  to  borrow  sums  with  which  to  pay  the 
expenses  of  the  South  African  War.  He 
informed  the  British  Minister  of  Finance 
that  America  was  prepared  to  take  a  con 
siderable  portion  of  that  loan.  When  the 
allotments  were  made  public  in  April,  1901, 
it  was  discovered  that  Mr.  Morgan,  for  him 
self  and  his  associates,  had  underwritten 
fifty  million  dollars. 

This  underwriting  was  very  successful; 
that  is  to  say,  it  was  almost  instantly  ab 
sorbed,  chiefly  by  the  leading  banks  of  the 


WORLD  BANKING  281 

United  States.  And  the  transaction  ranked 
this  country,  for  the  first  time,  among  the 
money  powers  of  the  world.  Although  the 
total  amount  was  small  compared  with  some 
of  the  national  loans  underwritten  by  the 
Rothschilds  and  the  Barings,  or  the  Russian 
loan,  underwritten  by  the  French  bankers, 
yet  it  was  great  enough  to  thoroughly  es 
tablish  the  fact  that  the  United  States  was 
at  last  prepared  to  take  its  share  of  impor 
tant  national  loans. 

Some  two  or  three  years  later  the  wrar  be 
tween  Japan  and  Russia  drove  each  of  these 
nations  into  foreign  markets  for  money. 
Russia,  as  usual,  turned  to  France;  Japan 
looked  to  England,  and  then  her  represent 
atives  were  told  that  Japan  would  undoubt 
edly  find  it  possible  to  persuade  American 
capitalists  to  supply  a  good  portion  of  her 
needs.  Mr.  Morgan,  with  two  other  inter 
national  banking  leaders,  underwrote  all  of 
the  Japanese  war  loan  which  was  offered  to 
the  United  States.  Later,  Mr.  Morgan  un 
derwrote  the  Honduras  loan,  part  of  the 
Argentine  loan,  and  he  is  usually  under  ne 
gotiation  w^ith  some  one  or  other  of  the 
South  and  Central  American  States,  which 


282        J.  PIEEPONT  MORGAN 

approaches  the  American  market  seeking 
loans  with  which  to  refund  its  overdue  obli 
gations. 

In  the  early  part  of  the  second  adminis 
tration  of  Theodore  Roosevelt,  Mr.  Morgan 
gained  very  important  concessions  involving 
the  construction  of  a  railroad  in  the  in 
terior  of  China.  It  was  arranged  to  invest 
about  fifty  millions  of  American  capital  in 
this  enterprise.  But  there  arose  in  China 
a  very  intense  popular  opposition  to  the  use 
of  foreign  capital  for  this  purpose.  The 
Chinese  Government  was  finally  forced  to 
heed  this  popular  feeling,  and  it  informed 
the  administration  at  Washington  that  if 
the  Americans  insisted  upon  carrying  out 
their  undertaking  under  these  concessions, 
dangerous  friction  would  be  engendered. 
No  one  here  knew  exactly  what  the  cause 
of  the  trouble  was,  but  it  was  clearly  serious. 
There  was  much  to  be  said  in  favour  of 
pressing  the  precise  legal  rights  of  the 
Americans  in  this  controversy;  more  or  less 
talk  went  the  rounds  to  the  effect  that  our 
government  would  be  called  upon  to  bring 
diplomatic  pressure  to  bear  upon  China  to 
permit  the  American  concessionaires  to  go 


WORLD  BANKING  283 

on  with  their  work.  But  J.  P.  Morgan  was 
then  in  Europe,  and,  although  people  might 
talk  of  what  they  would  do,  they  were  al 
ways  careful  really  to  do  nothing  until  "  J. 
P. "  had  said  the  word. 

As  soon  as  Mr.  Morgan  learned  of  these 
embarrassments  he  cut  short  his  European 
visit  and,  returning  to  America,  wyent 
straight  to  call  upon  President  Roosevelt  at 
Oyster  Bay.  He  intended  to  have  a  frank 
conversation  with  the  President,  and  to  dis 
pose  of  the  matter  in  his  own  way.  He  did 
both  things,  saying  to  the  President  that  if 
it  would  relieve  the  administration  at  Wash 
ington  of  any  embarrassment  and  tend  in 
any  way  to  maintain  the  friendly  relations 
between  China  and  the  United  States,  the 
Americans  would  cancel  the  concession, 
only  asking  that  China  be  required  to  make 
up  the  money  already  expended.  Roosevelt 
was  only  too  glad  to  accept  this  way  out  of 
the  difficulty,  and  the  concessions  were  can 
celled  and  the  Chinese  Government  bound 
itself  to  repay  the  American  concessionaires 
in  full. 

But  within  two  years  the  Chinese  Gov 
ernment  was  making  proposals  to  foreign 


284        J.  PIERPONT  MORGAN 

bankers  involving  a  loan  of  fifty  million 
dollars  for  the  construction  of  railroads  in 
two  of  the  larger  provinces.  Although  this 
loan  was  not  technically  a  national  one,  the 
principal  and  interest  were  to  be  guaran 
teed  by  China.  The  diplomatic  correspond 
ence  again  started  up;  it  seemed  that  the 
United  States  was  not  to  be  invited  to  share 
in  the  flotation  of  this  loan.  A  long  diplo 
matic  struggle  followed,  and  in  the  end  it 
was  agreed  that  the  United  States  should 
share  upon  equal  terms  with  Germany, 
France  and  England,  which  are  the  three 
nations  of  the  world  to  whom  appeal  is 
made  by  other  nations  when  the  financing 
of  national  obligations  is  undertaken.  The 
Morgan  syndicate  underwrote  the  American 
share  of  this  loan. 

These  transactions  added  more  and  more 
to  Mr.  Morgan's  stature  as  an  influence  in 
international  finance ;  he  was  the  first  Amer 
ican  to  reach  a  position  beside  the  Roths 
childs,  a  century  old;  the  first  American 
banker  to  compete  in  any  way  with  foreign 
bankers  in  the  domain  of  those  giant  finan 
cial  propositions  behind  which  stands  the 
credit  of  a  nation. 


WOELD  BANKING  285 

In  1910  it  was  announced  that  J.  P. 
Morgan  had  bought  a  block  of  502  shares 
of  the  Equitable  Life  Assurance  Society,  for 
which  he  paid  approximately  at  the  rate  of 
five  thousand  dollars  a  share.  The  news 
became  a  topic  not  only  of  local,  but  of  na 
tional  interest.  This  life  insurance  com 
pany,  with  its  enormous  assets,  with  its  sur 
plus  amounting  to  eighty-five  millions,  was 
a  tremendous  factor  in  the  money  markets. 
It  was  the  operation  of  this  society  for 
the  promotion  of  securities,  and  its  owner 
ship  or  control  of  very  large  financial  in 
stitutions,  which  led  to  the  Hughes  inves 
tigation  of  1904-05,  an  event  which  reached 
the  proportions  of  a  very  great  national 
scandal.  When  the  Equitable  fell  into  diffi 
culties,  Thomas  F.  Ryan  bought  this  block 
of  502  shares  from  James  Hazen  Hyde.  In 
order  to  satisfy  the  public  that  the  manage 
ment  of  the  Equitable  would  be  sound  and 
ethically  right,  he  promptly  transferred  all 
authority  which  vested  in  that  stock  to  a 
board  of  trustees.  These  trustees  were  ex- 
President  Grover  Cleveland,  George  West- 
inghouse,  and  Justice  Morgan  J.  O'Brien. 
Every  power  which  the  ownership  of  this 


286        J.  PIERPONT  MORGAN 

stock  carried,  except  the  power  to  transfer 
it,  was  vested  in  these  trustees.  They  were 
expected  to  elect  directors  who  would  repre 
sent  the  policyholders,  and  by  such  repre 
sentatives  give  the  policyholders  a  large 
share  in  the  management  of  the  company. 
After  a  few  years,  Harriman,  who  had  al 
ways  wanted  that  stock,  succeeded  in  buying 
half  of  Ryan's  interest.  When  Harriman 
died  Mr.  Morgan  had  no  difficulty  in  ac 
quiring  it  all. 

Several  months  passed  before  he  named 
the  new  board  of  trustees;  these  were  ex- 
Justice  O'Brien,  George  W.  Perkins,  an 
acknowledged  insurance  expert  and  for  ten 
years  a  partner  of  Mr.  Morgan,  and  Lewis 
Cass  Ledyard.  Policyholders  all  over  the 
world  were  eager  to  know  what  Mr.  Mor 
gan  proposed  to  do  with  the  Equitable ;  why 
had  he  bought  the  controlling  interest  ? 

Then  came  assurances  that  Mr.  Morgan 
had  two  purposes  in  doing  this,  both  of 
them,  as  he  believed,  in  the  interest  of  the 
society  and  of  the  public.  First,  he  in 
tended  to  have  this  majority  stock  so 
trusteed  that  the  voting  power  would  always 
be  exercised  wholly  in  the  interest  of  the 


WORLD  BANKING  287 

policy-holders.  Second,  lie  proposed  that  as 
soon  as  a  practicable  method  of  complete 
mutualisatioii  of  the  company  could  be  de 
vised,  that  the  entire  capital  stock  be  elimi 
nated,  and  the  ownership  of  the  company 
pass  exclusively  into  the  possession  of  the 
policyholders.  Thus  be  hoped  to  crown  his 
career  by  bringing  about  an  unprecedented 
and  extraordinary  change  in  the  ownership 
of  what  is  one  of  the  greatest  corporations 
in  the  world,  in  view  of  its  assets  and  its 
surplus. 

The  legal  difficulties  in  the  way  of  mutual 
isatioii  centre  in  the  disposition  that  is  to  be 
made  of  the  surplus  and  the  manner  in 
wrhich  some  portion  of  that  surplus  may  be 
used  to  pay  for  the  capital  stock  in  order 
that  this  stock  may  be  cancelled.  When 
these  difficulties  are  straightened  out  by 
means  of  a  bill  in  the  State  Legislature,  the 
policyholders  of  the  Equitable  will  be  in 
possession  of  a  surplus  which,  in  the  course 
of  a  few  years,  should  amount  to  a  hundred 
million  dollars.  It  will  then  be  possible  to 
reduce  the  cost  of  premiums,  either  by  ap 
plying  a  portion  of  the  surplus  to  dividends, 
or  reducing  the  first  cost  of  insurance.  Mr. 


288        J.  PIERPONT  MORGAN 

Morgan,  when  he  bought  this  block  of  502 
shares  of  a  capitalisation  of  thousand  shares 
of  this  company,  never  saw  the  certificates 
of  stock;  he  paid  three  million  dollars,  but 
no  papers  of  any  kind  passed  to  show  the 
sale  had  been  made  until  the  stock  was 
transferred  to  the  trustees,  which  was  done 
by  power  of  attorney. 

When  Ryan  sold  Mr.  Morgan  his  in 
surance  stock  he  also  turned  over  to  him 
two  trust  companies,  which  the  latter  com 
bined  with  the  Guaranty  Trust  Company 
into  a  single  powerful  institution.  For  a 
number  of  years  Mr.  Morgan's  principal 
banking  associations  have  been  with  the 
First  National  Bank.  But  with  the  great 
development  of  the  combination  idea  came 
the  need  for  a  wider  and  wider  control  of 
capital,  to  be  flung  in  great  masses  into  the 
uses  of  the  industrial  advance,  not  only  in 
our  own  country,  but  also  in  South  America, 
Central  America  and  Mexico,  and  even  the 
Far  East.  It  was  not  enough  any  longer  to 
control  one  bank  or  two  or  three,  for  ob 
viously  the  tendency  to  build  corporations 
as  big  and  powerful  as  possible  argued  the 
necessity  of  financial  resources  equally  big 


A  PERIOD  OF  REACTION      273 

would  send  out  to  the  curb  and  buy  a  block 
of  fifty,  and  at  the  same  time  put  in  fifty  of 
the  pool  shares  at  the  same  price;  which 
had  the  double  and  desirable  effect  of  creat 
ing  a  business  in  the  stock,  and  at  the  same 
time  of  working  off  the  heavy  holdings  of 
the  pool.  Schwab  suggested  to  Gates  that 
as  the  syndicate  managers,  namely  Morgan 
&  Co.,  had  treated  him  very  "white"  in  this 
whole  matter,  it  would  be  "a  nice  thing  to 
do"  to  include  their  stock — the  stock  he  had 
turned  over  to  them  in  lieu  of  interest 
money,  etc. — in  the  pool  agreement.  The 
name  of  J.  P.  Morgan  &  Co.  was  inserted  in 
the  paper  with  the  expectation  that  Morgan 
would  sign  it.  This  offer  was  taken  to  the 
Morgan  office,  and  when  read  by  his  part 
ners — Mr.  Morgan  was  in  Europe  at  that 
time — was  rejected  positively.  The  firm 
would  have  nothing  to  do  with  such  a  bar 
gain. 

As  no  one  would  buy  the  stock  anyhow, 
this  pool  agreement  never  got  beyond  the 
paper  stage;  but  when  fetched  forth  at  the 
post  mortem  of  the  shipbuilding  combina 
tion  it  was  used  with  sensational  ef 
fect,  both  by  the  newspapers  and  by 


274        J.  PIERPONT  MORGAN 

the  bear  clique,  which  at  that  time  was 
pounding  at  the  price  of  Steel  stock  and  de 
claring  that  all  that  had  happened  to  the 
United  States  Shipbuilding  combination 
would  happen  likewise  to  United  States 
Steel.  Mr.  Morgan  was  urged  again  and 
again  to  make  a  public  statement,  defend 
ing  himself  and  setting  forth  all  the  facts 
of  the  shipbuilding  matter  as  far  as  Morgan 
&  Co.  were  concerned.  He  always  refused, 
saying,  very  characteristically,  that  none  of 
the  members  of  the  steel  syndicate  had 
asked  him  to  answer  any  questions  or  to 
give  an  explanation  of  any  sort.  To  his 
mind  they  were  the  only  ones  who  had  the 
right  to  question  him — and  they  were  sat 
isfied. 

Here  this  chapter  on  the  spirit  of  com 
bination  as  the  backbone  of  Mr.  Morgan's 
business  life  may  well  end.  He  began  by 
reorganising  railroads  which  had  fallen  into 
dire  straits  financially;  then  he  went  on 
from  this  point  and  combined  small  and 
comparatively  weak  railway  units  into  units 
big  and  powerful;  and  then  he  applied  the 
same  methods  to  manufacturing  industries. 


A  PERIOD  OF  REACTION     275 

In  all  these  operations  the  business  motive 
and  aim  was  to  create  institutions  which 
would  find  a  ready  sale  for  their  stock,  and 
permanent  value  in  the  same.  The  elmina- 
tion  of  competition,  of  which  so  much  has 
been  said,  almost  invariably  placed  his  com 
bination  on  a  stable  and  prosperous  footing ; 
another  side,  which  is  of  great  importance  in 
dealing  with  this  movement,  is  that  while 
the  stock  of  small  individual  industries, 
however  prosperous  they  were,  could  have 
only  a  local  sale,  a  sort  of  neighbourhood 
market,  the  moment  they  were  brought  to 
gether  and  given  a  name  to  be  known  all 
over  the  nation,  the  stock  of  the  new  com 
pany  could  be  offered,  and  wTould  be  taken 
up,  far  and  wide.  It  is  clear  that  this  move 
ment  toward  combination  finds  its  lease  of 
life  in  this  latter  condition  of  affairs.  In 
other  words,  if  these  giant  organisations 
are  mismanaged  or  abused  by  those  in  con 
trol,  or  if  they  were  not  in  the  beginning 
well  conceived  and  organised,  their  securi 
ties  will  fall  off  in  value  until  their  dis 
integration  into  the  original  units  becomes 
the  one  desirable  and  business-like  thing  to 


276        J.  PIERPONT  MORGAN 

effect.  That  would  be  the  work  of  a  man 
proceeding  in  a  direction  exactly  the  reverse 
of  Mr.  Morgan's. 

In  the  past  twenty  years  we  have  seen 
many  kinds  of  men  at  work  in  the  field  of 
changing  conditions,  some  building  up  in 
stitutions  like  the  Standard  Oil  or  the 
Woollen  Trust  as  a  means  of  making  and 
keeping  an  enormous  personal  fortune; 
others,  opportunists,  dipping  in  and  getting 
out  whenever  they  see  the  vision  of  a  pos 
sible  " clean-up";  but  Mr.  Morgan  in  his 
long  life  has  not  been  a  simple  fortune- 
maker  of  either  class — he  has  been  the  maker 
of  industries,  the  consistent  agent  of  solid 
business  conditions.  Yet  there  are  many 
who  distrust  what  they  call  the  "Morganisa- 
tion"  of  industry,  with  their  eyes  fastened 
upon  the  social  flaws  inherent  in  these  same 
wonderful  organisations  of  his. 

In  writing  this  life  the  author  would 
not  for  one  moment  belittle,  by  ignoring  it, 
the  force  of* this  point  of  view.  But  if 
wholesome  and  right,  it  is  also  vague  and 
aspiring,  and  would  bring  only  confusion  to 
the  simple  task  of  setting  down  here  the 
events  of  J.  P.  Morgan's  life.  Nothing  is 


A  PERIOD  OF  REACTION      277 

to  be  gained  by  ascribing  to  a  man  aims 
which  he  never  possessed,  or  by  forcing  the 
lack  of  such  aims  as  an  issue  against  him. 
To  write  his  life  from  a  sharp  "uplift" 
angle  would  be  to  produce  an  unreal  and 
senseless  image,  containing  few  features  of 
the  man  himself.  When  this  point  of  view 
shall  be  embodied  in  a  set  of  changes  it  will 
then  undoubtedly  furnish  a  luminous  com 
parison  with  present  conditions  to  show  how 
crude,  relatively,  and  in  the  rough  they  are. 


CHAPTER  XIII 

WORLD  BANKING 

THE  leadership  of  J.  P.  Morgan  con 
ducted  the  United  States  into  the  field 
of  international  financing.  The  real  test  of 
the  ability  of  a  nation  to  rank  itself  with  the 
great  money  powers  of  the  world  is  fully 
met  when  its  bankers  become  the  creditors 
of  another  nation.  When  the  Eothschilds 
or  the  Baring  Brothers  underwrite  a  for 
eign  national  loan,  then,  through  that  action, 
they  make  the  nation  of  which  they  are  citi 
zens  to  a  greater  or  less  extent  a  world 
money  power.  Before  the  beginning  of  the 
twentieth  century  the  United  States  never 
entered  into  relations  of  this  kind;  always 
this  country  had  been  the  debtor  of  other 
nations.  But  the  immense  accumulation  of 
capital  seeking  investment,  and  the  intimate 
relations  which  were  being  established  be 
tween  American  and  European  bankers- 
together  with  convincing  proof  that  the 

278 


WOELD  BANKING  279 

prosperity  of  the  country  was  now  assured 
— made  it  possible  for  American  bankers 
like  Mr.  Morgan  to  undertake  the  making 
of  foreign  loans. 

In  other  words  this  country,  which  for 
fifty  years  had  held  out  its  hands  to  the 
world  for  money  with  which  to  develop  its 
great  industries,  reached  the  position  a  lit 
tle  more  than  ten  years  ago  where  it  had 
a  superfluity  of  its  own  to  dispose  of  in  fi 
nancing  the  needs  of  other  countries. 

The  first  foreign  loan  ever  negotiated  in 
this  country  was  made  through  Morgan  and 
Company  to  the  Republic  of  Mexico  in  the 
year  1899.  Mexico  entered  the  market  with 
a  proposition  for  a  sale  of  national  bonds,  the 
chief  purpose  of  which  was  to  refund  earlier 
national  obligations,  and  Mr.  Morgan  and 
his  associates  speedily  came  to  terms  with 
the  Mexican  Government  and  underwrote 
the  entire  issue.  The  matter  attracted  less 
attention  than  was  its  due,  considering  the 
significance  of  such  an  event  in  the  life  of 
this  country.  But  the  loan  itself  was  not 
large,  and  there  were  already  in  Mexican 
railroads  and  mines  vast  amounts  of  Ameri 
can  money. 


280        J.  PIERPONT  MOKGAN 

Two  years  later,  England  came  seeking  a 
loan.  Now,  it  was  English  money  which 
built  our  railroads;  for  half  a  century 
American  business  had  been  almost  de 
pendent  upon  supplies  of  English  capital; 
our  government  bond  issues,  although  they 
were  financed  in  New  York  and  Philadel 
phia,  had  eventually  been  sold  in  great 
quantities  throughout  Great  Britain.  Con 
sequently  it  meant  much  to  our  national 
pride  of  position  to  turn  the  tables  on  the 
mother  country — to  have  money  to  lend 
where  we  had  always  been  accustomed  to 
borrow  or  receive.  Mr.  Morgan  was  in  Lon 
don  when  the  British  Government  started 
out  to  borrow  sums  with  which  to  pay  the 
expenses  of  the  South  African  War.  He 
informed  the  British  Minister  of  Finance 
that  America  was  prepared  to  take  a  con 
siderable  portion  of  that  loan.  When  the 
allotments  were  made  public  in  April,  1901, 
it  was  discovered  that  Mr.  Morgan,  for  him 
self  and  his  associates,  had  underwritten 
fifty  million  dollars. 

This  underwriting  was  very  successful; 
that  is  to  say,  it  was  almost  instantly  ab 
sorbed,  chiefly  by  the  leading  banks  of  the 


WORLD  BANKING  281 

United  States.  And  the  transaction  ranked 
this  country,  for  the  first  time,  among  the 
money  powers  of  the  world.  Although  the 
total  amount  was  small  compared  with  some 
of  the  national  loans  underwritten  by  the 
Rothschilds  and  the  Barings,  or  the  Russian 
loan,  underwritten  by  the  French  bankers, 
yet  it  was  great  enough  to  thoroughly  es 
tablish  the  fact  that  the  United  States  was 
at  last  prepared  to  take  its  share  of  impor 
tant  national  loans. 

Some  two  or  three  years  later  the  war  be 
tween  Japan  and  Russia  drove  each  of  these 
nations  into  foreign  markets  for  money. 
Russia,  as  usual,  turned  to  France;  Japan 
looked  to  England,  and  then  her  represent 
atives  were  told  that  Japan  would  undoubt 
edly  find  it  possible  to  persuade  American 
capitalists  to  supply  a  good  portion  of  her 
needs.  Mr.  Morgan,  with  two  other  inter 
national  banking  leaders,  underwrote  all  of 
the  Japanese  war  loan  which  was  offered  to 
the  United  States.  Later,  Mr.  Morgan  un 
derwrote  the  Honduras  loan,  part  of  the 
Argentine  loan,  and  he  is  usually  under  ne 
gotiation  with  some  one  or  other  of  the 
South  and  Central  American  States,  which 


282        J.  PIERPONT  MORGAN 

approaches  the  American  market  seeking 
loans  with  which  to  refund  its  overdue  obli 
gations. 

In  the  early  part  of  the  second  adminis 
tration  of  Theodore  Roosevelt,  Mr.  Morgan 
gained  very  important  concessions  involving 
the  construction  of  a  railroad  in  the  in 
terior  of  China.  It  was  arranged  to  invest 
about  fifty  millions  of  American  capital  in 
this  enterprise.  But  there  arose  in  China 
a  very  intense  popular  opposition  to  the  use 
of  foreign  capital  for  this  purpose.  The 
Chinese  Government  was  finally  forced  to 
heed  this  popular  feeling,  and  it  informed 
the  administration  at  "Washington  that  if 
the  Americans  insisted  upon  carrying  out 
their  undertaking  under  these  concessions, 
dangerous  friction  would  be  engendered. 
No  one  here  knew  exactly  what  the  cause 
of  the  trouble  was,  but  it  was  clearly  serious. 
There  was  much  to  be  said  in  favour  of 
pressing  the  precise  legal  rights  of  the 
Americans  in  this  controversy ;  more  or  less 
talk  went  the  rounds  to  the  effect  that  our 
government  would  be  called  upon  to  bring 
diplomatic  pressure  to  bear  upon  China  to 
permit  the  American  concessionaires  to  go 


WOELD  BANKING  283 

on  with  their  work.  But  J.  P.  Morgan  was 
then  in  Europe,  and,  although  people  might 
talk  of  what  they  would  do,  they  were  al 
ways  careful  really  to  do  nothing  until  "  J. 
P. ' '  had  said  the  word. 

As  soon  as  Mr.  Morgan  learned  of  these 
embarrassments  he  cut  short  his  European 
visit  and,  returning  to  America,  went 
straight  to  call  upon  President  Roosevelt  at 
Oyster  Bay.  He  intended  to  have  a  frank 
conversation  with  the  President,  and  to  dis 
pose  of  the  matter  in  his  own  way.  He  did 
both  things,  saying  to  the  President  that  if 
it  would  relieve  the  administration  at  Wash 
ington  of  any  embarrassment  and  tend  in 
any  way  to  maintain  the  friendly  relations 
between  China  and  the  United  States,  the 
Americans  would  cancel  the  concession, 
only  asking  that  China  be  required  to  make 
up  the  money  already  expended.  Roosevelt 
was  only  too  glad  to  accept  this  way  out  of 
the  difficulty,  and  the  concessions  were  can 
celled  and  the  Chinese  Government  bound 
itself  to  repay  the  American  concessionaires 
in  full. 

But  within  two  years  the  Chinese  Gov 
ernment  was  making  proposals  to  foreign 


284        J.  PIERPONT  MORGAN 

bankers  involving  a  loan  of  fifty  million 
dollars  for  the  construction  of  railroads  in 
two  of  the  larger  provinces.  Although  this 
loan  was  not  technically  a  national  one,  the 
principal  and  interest  were  to  be  guaran 
teed  by  China.  The  diplomatic  correspond 
ence  again  started  up;  it  seemed  that  the 
United  States  was  not  to  be  invited  to  share 
in  the  flotation  of  this  loan.  A  long  diplo 
matic  struggle  followed,  and  in  the  end  it 
was  agreed  that  the  United  States  should 
share  upon  equal  terms  with  Germany, 
France  and  England,  which  are  the  three 
nations  of  the  world  to  whom  appeal  is 
made  by  other  nations  when  the  financing 
of  national  obligations  is  undertaken.  The 
Morgan  syndicate  underwrote  the  American 
share  of  this  loan. 

These  transactions  added  more  and  more 
to  Mr.  Morgan's  stature  as  an  influence  in 
international  finance ;  he  was  the  first  Amer 
ican  to  reach  a  position  beside  the  Roths 
childs,  a  century  old;  the  first  American 
banker  to  compete  in  any  way  with  foreign 
bankers  in  the  domain  of  those  giant  finan 
cial  propositions  behind  which  stands  the 
credit  of  a  nation. 


WORLD  BANKING  285 

In  1910  it  was  announced  that  J.  P. 
Morgan  had  bought  a  block  of  502  shares 
of  the  Equitable  Life  Assurance  Society,  for 
which  he  paid  approximately  at  the  rate  of 
five  thousand  dollars  a  share.  The  news 
became  a  topic  not  only  of  local,  but  of  na 
tional  interest.  This  life  insurance  com 
pany,  with  its  enormous  assets,  with  its  sur 
plus  amounting  to  eighty-five  millions,  was 
a  tremendous  factor  in  the  money  markets. 
It  was  the  operation  of  this  society  for 
the  promotion  of  securities,  and  its  owner 
ship  or  control  of  very  large  financial  in 
stitutions,  which  led  to  the  Hughes  inves 
tigation  of  1904-05,  an  event  which  reached 
the  proportions  of  a  very  great  national 
scandal.  When  the  Equitable  fell  into  diffi 
culties,  Thomas  F.  Ryan  bought  this  block 
of  502  shares  from  James  Hazen  Hyde.  In 
order  to  satisfy  the  public  that  the  manage 
ment  of  the  Equitable  would  be  sound  and 
ethically  right,  he  promptly  transferred  all 
authority  which  vested  in  that  stock  to  a 
board  of  trustees.  These  trustees  were  ex- 
President  Grover  Cleveland,  George  West- 
inghouse,  and  Justice  Morgan  J.  O'Brien. 
Every  power  which  the  ownership  of  this 


286        J.  PIERPONT  MORGAN 

stock  carried,  except  the  power  to  transfer 
it,  was  vested  in  these  trustees.  They  were 
expected  to  elect  directors  who  would  repre 
sent  the  policyholders,  and  by  such  repre 
sentatives  give  the  policyholders  a  large 
share  in  the  management  of  the  company. 
After  a  few  years,  Harriman,  who  had  al 
ways  wanted  that  stock,  succeeded  in  buying 
half  of  Ryan's  interest.  When  Harriman 
died  Mr.  Morgan  had  no  difficulty  in  ac 
quiring  it  all. 

Several  months  passed  before  he  named 
the  new  board  of  trustees;  these  were  ex- 
Justice  O'Brien,  George  W.  Perkins,  an 
acknowledged  insurance  expert  and  for  ten 
years  a  partner  of  Mr.  Morgan,  and  Lewis 
Cass  Ledyard.  Policyholders  all  over  the 
f  |  .  world  were  eager  to  know  what  Mr.  Mor- 
^  \  gan  proposed  to  do  with  the  Equitable ;  why 
had  he  bought  the  controlling  interest? 

Then  came  assurances  that  Mr.  Morgan 
had  two  purposes  in  doing  this,  both  of 
them,  as  he  believed,  in  the  interest  of  the 
society  and  of  the  public.  First,  he  in 
tended  to  have  this  majority  stock  so 
trusteed  that  the  voting  power  would  always 
be  exercised  wholly  in  the  interest  of  the 


WORLD  BANKING  287 

policyholders.  Second,  he  proposed  that  as 
soon  as  a  practicable  method  of  complete 
mutualisation  of  the  company  could  be  de 
vised,  that  the  entire  capital  stock  be  elimi 
nated,  and  the  ownership  of  the  company 
pass  exclusively  into  the  possession  of  the 
policyholders.  Thus  be  hoped  to  crown  his 
career  by  bringing  about  an  unprecedented 
and  extraordinary  change  in  the  ownership 
of  what  is  one  of  the  greatest  corporations 
in  the  world,  in  view  of  its  assets  and  its 
surplus. 

The  legal  difficulties  in  the  way  of  mutual 
isation  centre  in  the  disposition  that  is  to  be 
made  of  the  surplus  and  the  manner  in 
which  some  portion  of  that  surplus  may  be 
used  to  pay  for  the  capital  stock  in  order 
that  this  stock  may  be  cancelled.  When 
these  difficulties  are  straightened  out  by 
means  of  a  bill  in  the  State  Legislature,  the 
policyholders  of  the  Equitable  will  be  in 
possession  of  a  surplus  which,  in  the  course 
of  a  few  years,  should  amount  to  a  hundred 
million  dollars.  It  will  then  be  possible  to 
reduce  the  cost  of  premiums,  either  by  ap 
plying  a  portion  of  the  surplus  to  dividends, 
or  reducing  the  first  cost  of  insurance.  Mr. 


288        J.  PIERPONT  MOBGAN 

Morgan,  when  he  bought  this  block  of  502 
shares  of  a  capitalisation  of  thousand  shares 
of  this  company,  never  saw  the  certificates 
of  stock;  he  paid  three  million  dollars,  but 
no  papers  of  any  kind  passed  to  show  the 
sale  had  been  made  until  the  stock  was 
transferred  to  the  trustees,  which  was  done 
by  power  of  attorney. 

When  Byan   sold  Mr.   Morgan  his   in 
surance  stock  he  also  turned  over  to  him 

i 

'two  trust  companies,  which  the  latter  com 
bined  with  the  Guaranty  Trust  Company 
into  a  single  powerful  institution.  For  a 
number  of  years  Mr.  Morgan's  principal 
banking  associations  have  been  with  the 
First  National  Bank.  But  with  the  great 
development  of  the  combination  idea  came 
the  need  for  a  wider  and  wider  control  of 
capital,  to  be  flung  in  great  masses  into  the 
uses  of  the  industrial  advance,  not  only  in 
our  own  country,  but  also  in  South  America, 
Central  America  and  Mexico,  and  even  the 
Far  East.  It  was  not  enough  any  longer  to 
control  one  bank  or  two  or  three,  for  ob 
viously  the  tendency  to  build  corporations 
as  big  and  powerful  as  possible  argued  the 
necessity  of  financial  resources  equally  big 


WORLD  BANKING  289 

and  powerful.  The  leader  in  the  develop 
ment  of  combination  among  the  banks  was 
the  National  City  Bank,  upon  the  director 
ate  of  which  were  three  members  of  the 
Morgan  firm.  The  National  City,  First  Na 
tional,  the  Chase  National,  and  afterwards 
the  Bank  of  Commerce  were  brought  into 
close  and  friendly  relations.  The  Mechan 
ics  and  Metals  National,  the  Phoenix  Na 
tional,  the  Chatham  National,  and  the 
Liberty  were  added  to  the  list  of  institutions 
whose  funds  are  at  the  disposal  of  Mr.  Mor 
gan.  No  less  than  seven  New  York  City 
trust  companies  have  come  under  his  direct 
control — the  Astor,  Bankers',  Mercantile, 
Standard,  New  York,  Equitable,  and  Guar 
anty.  His  banking  power,  expressed  in 
figures,  amounts  to  considerably  more  than 
a  billion  dollars;  his  total  financial  powyer, 
in  which  should  be  included  the  assets  of  all 
the  railroads  and  all  the  industrial  plants  in 
which  the  Morgan  influence  is  paramount, 
has  been  estimated  at  nearly  ten  billions., 
But  such  figures  are  of  dubious  value,  for 
only  a  practical  test  could  define  the  limits 
of  Mr.  Morgan's  financial  influence,  and 
that  test  will  never  be  made. 


290        J.  PIEEPONT  MORGAN 

Certain  items  may  be  posted  down,  but 
the  foundation  of  his  authority  is  personal, 
is  based  upon  a  well-nigh  universal  confi 
dence  on  the  part  of  investors  in  the  ac 
curacy  of  Mr.  Morgan's  judgment,  the 
sincerity  of  his  aims,  and  his  bred-in-the- 
bone  honesty.  Under  almost  any  circum 
stances  the  stockholders  of  a  corporation 
with  which  Mr.  Morgan  is,  or  has  been, 
connected  would  rather  have  him  manage 
their  financial  affairs  than  any  other  per 
son;  they  are  prone  fairly  to  dump  their 
responsibilities  in  his  broad  lap ;  his  power 
has  come  to  him  as  much  in  this  way  as 
through  his  own  aggressiveness — though 
there  has  been  no  want  of  that.  All  this 
was  illustrated  most  dramatically  in  the 
panic  of  1907 :  at  that  time  the  need  was  not 
so  much  for  a  leader  as  for  a  man  who  could 
be  trusted  to  act  as  the  agent  of  all  the 
varied  financial  forces  that  were  beating 
about  in  headless  confusion — to  handle  their 
money,  and  to  bring  about  the  thing  all 
desired  without  favouring  anyone  or  com 
mitting  the  banking  community  to  any  im 
practicable  course. 

At  first  the  heads  of  the  old,  strong,  con- 


WOELD  BANKING  291 

servatively  managed  banks  and  trust  com 
panies — particularly  of  the  trust  companies 
—thought  it  possible  that  they  should  hold 
aloof  from  the  troubles  of  the  other  institu 
tions.  They  had  done  no  wrong,  had  made 
no  loans,  foolish,  or  criminal,  upon  unmar 
ketable  securities;  and  their  attitude  was, 
let  the  guilty  be  punished — it's  deserved. 
They  failed  to  remember  that  a  panic  is  no 
respecter  of  persons,  that  a  money  strin 
gency  knows  not  the  sacred  from  the  pro 
fane — that  all  must  stand  or  fall  together 
in  a  storm  of  such  fierceness  as  that  of  No 
vember,  1907.  It  was  Mr.  Morgan  who 
made  them  change  their  attitude.  He  saw 
at  once  that  the  only  remedy  for  the  situa 
tion  was  to  raise  a  common  fund  for  the 
common  necessities  of  all;  and  he,  person 
ally,  made  all  contribute,  under  penalty,  if 
they  did  not  do  so,  of  lacking  assistance 
when  the  pinch  should  come  home  to  them. 
It  all  began  as  early  as  the  month  of 
July,  when  the  United  States  Steel  Cor 
poration  reported  an  alarming  falling  off  in 
orders  for  its  products.  It  was  to  be  seen 
then  that  conditions  were  shaping  for  an 
industrial  set-back  of  the  first  magnitude. 


292        J.  PIERPONT  MORGAN 

The  fear  that  there  would  not  be  money 
enough  to  move  the  crops  of  that  summer 
from  the  harvest  fields  to  the  market  sprang 
up,  and,  along  with  it,  a  widespread  dispo 
sition  to  hoard  money.  The  first  really  im 
pressive  proof  that  a  financial  storm  was 
gathering  was  furnished  a  little  later  by  the 
attempt  of  the  City  of  New  York  to  market 
a  large  block  of  its  own  bonds.  The  city 
offered  these  bonds  upon  a  four  per  cent,  in 
terest  basis.  When  the  bankers,  who  usu 
ally  are  ready  enough  to  buy  New  York  City 
bonds,  were  asked,  and  refused,  to  make  a 
proposition  upon  which  the  Comptroller 
could  rely  to  the  extent  of  feeling  assured 
of  a  market  for  his  offering,  a  surprising 
thing  happened.  The  city  withdrew  its 
offer,  in  spite  of  needing  the  money,  and  by 
this  action  demonstrated  what  a  financial 
condition  there  was  when  it  was  impossible 
to  secure  the  sale  of  a  block  of  bonds  bear 
ing  four  per  cent,  interest,  backed  by  the 
credit  of  New  York. 


CHAPTER  XIV 

THE  PANIC   OF   1907 

THROUGHOUT  the  month  of  Septem 
ber  the  men  representing  the  big 
money  interests  often  met  in  consultation; 
the  newspapers  were  urged  to  talk  encour 
agingly — to  assert  in  as  many  kinds  of  ways 
as  possible  that  there  was  really  nothing  in 
the  situation  that  justified  the  growing 
scare.  Without  the  fear  itself  there  would 
indeed  have  been  nothing  to  breed  an  abso 
lute  catastrophe,  but  if  fear  should  drive 
things  to  an  immediate  accounting  there 
were  banks  and  trust  companies  which 
would  be  unable  to  stand  the  test.  And  so 
it  happened;  first  came  the  Heinze  failure 
late  in  October,  and  the  investigation  by  the 
Clearing  House  Committee,  which  discov 
ered  loans  on  unmarketable  securities  in  the 
Heinze-Morse-Thomas  chain  of  banks.  The 
three  men  were  eliminated  without  loss  of 
time  from  the  banking  situation,  but  this 

293 


294        J.  PIEKPONT  MOKGAN 

came  too  late  to  save  the  Knickerbocker 
Trust  Company,  which,  through  its  presi 
dent,  Charles  T.  Barney,  was  connected 
with  some  of  the  Morse  companies. 

Mr.  Barney  had  been  in  absolute  charge 
of  the  institution;  to  be  sure,  there  were 
thirty-five  directors,  but  most  of  them  were 
rich  young  men,  possessed  of  but  a  meagre 
knowledge  of  banking,  and  who,  moreover, 
paid  practically  no  attention  to  the  trust 
company's  affairs.  They  left  the  manage 
ment  of  the  bank's  affairs  to  the  Executive 
Committee,  which  was  dominated  by  Bar 
ney;  and  Barney  passed  on  all  the  loans, 
some  of  which  were  unknown  even  to  the 
Executive  Committee.  Loans  to  the  Amer 
ican  Ice  Company,  one  of  Morse's  pet 
schemes,  constituted  one  of  the  principal 
sources  of  the  trust  company's  weakness. 
On  the  day  before  the  Knickerbocker  closed, 
Henry  B.  Hollins,  one  of  the  directors, 
called  a  special  meeting  of  the  board,  and 
said  that  unless  Mr.  Barney  resigned  the 
presidency  the  clearing  house  banks  would 
withdraw  all  support  from  the  threatened 
trust  company.  Accordingly,  Mr.  Barney's 
resignation  was  accepted  and  A.  Foster 


THE  PANIC  OF  1907  295 

Higgins  elected  in  his  place.  And  everyone 
breathed  freely  once  more,  feeling  that  the 
day  was  saved.  After  the  meeting  had  ad 
journed,  while  some  of  the  directors  were 
discussing  what  they  had  done,  a  message 
came  over  the  telephone  from  a  bank  in 
Newark  that  the  National  Bank  of  Com 
merce  had  refused  to  clear  the  business  of 
the  Knickerbocker.  It  will  be  remembered 
that  the  trust  companies  left  the  clearing 
house  association  some  time  before,  when 
called  upon  to  increase  their  reserves,  and 
that  each  trust  company  had  formed  an  al 
liance  with  some  great  bank  which  cleared 
its  checks.  The  refusal  of  the  Bank  of 
Commerce  to  continue  this  relationship  was 
an  absolutely  crushing  blowT,  and  all  unex 
pected.  It  threw  the  directors  into  confu 
sion,  but  it  was  hastily  agreed  to  hold  a 
meeting  that  evening  at  Sherry's,  and  all 
the  directors  who  were  in  town  were  sum 
moned. 

The  bank  had  ten  million  dollars  in  cash 
in  its  vaults,  but  this  would  be  nothing  in 
the  event  of  a  run.  Charles  W.  Steele  and 
George  W.  Perkins,  of  the  Morgan  firm, 
had  been  asked  to  the  meeting,  and  they 


296        J.  PIEKPONT  MORGAN 

assured  the  directors  that  undoubtedly  the 
clearing  house  banks  would  stand  back  of 
the  Knickerbocker  and  advance  enough 
money  to  tide  the  company  along.  But  the 
precise  manner  in  which  this  tiding  over 
was  to  be  done,  and  who  was  to  do  it,  were 
not  decided.  Justice  Gerard,  on  the  other 
hand,  advised  that  the  trust  company  close 
its  doors,  saying  that  under  the  circum 
stances  it  would  be  folly  to  open  in  the 
morning.  The  meeting  generally  favoured 
opening,  but  underlying  this  determination 
on  the  part  of  the  directors  there  was  un 
doubtedly  a  definite  suspicion  that  the  com 
pany  was  moving  on  to  its  ruin.  The  talk 
became  more  and  more  excited  as  the  even 
ing  drew  on;  doors  were  thrown  open,  and 
people  who  had  been  supping  late  at 
Sherry 's  wandered  in  and  listened  and  gave 
their  advice;  strangers  stood  up  on  chairs 
and  shouted,  and  in  the  midst  of  this  bed 
lam  many  of  them  slipped  away  to  the 
Night  and  Day  Bank  near  by  on  the  Ave 
nue  and  put  in  checks  to  withdraw  their 
deposits.  When  the  line  formed  in  the 
morning  outside  the  impressive  columns  of 
the  Trust  Company  building  at  Thirty- 


THE  PANIC  OF  1907  297 

fourth  Street  and  Fifth  Avenue,  the  first 
man  was  the  messenger  from  the  Night  and 
Day  Bank.  He  held  in  his  hand  a  thick 
bundle  of  checks,  and  every  few  minutes  a 
runner  would  hand  him  some  more.  Among 
these  was  a  check  for  a  million,  drawn  in 
favour  of  the  Trust  Company  of  America. 
It  was  a  matter  of  life  or  death  with  this 
latter  company,  the  offices  and  halls  of 
which  were  soon  to  be  filled  with  a  push 
ing  mob  demanding  cash  on  the  spot  for  its 
deposits. 

The  same  evening  with  this  meeting  J. 
P.  Morgan  hurried  into  town  from  the 
country;  his  own  house  was  closed,  so  he 
stayed  with  his  son-in-law,  Herbert  L.  Sat- 
terlee,  whose  residence  stands  at  one  side  of 
the  library  on  Thirty-sixth  Street,  as  Mr. 
Morgan's  own  house  stands  on  the  other.  In 
the  morning  Mr.  Morgan  was  at  his  office 
when  Directors  John  Magee  and  G.  I. 
Boissevain,  representing  the  directorate  of 
the  Knickerbocker,  called  upon  him  to  learn 
what  chance  there  was  of  receiving  help. 
Mr.  Morgan  said  flatly  that  nothing  could 
be  done.  No  arguments  would  move  him; 
he  would  not  listen  to  them. 


298        J.  PIERPONT  MORGAN 

To  the  new  president,  Mr.  Higgins,  Mr. 
Morgan  was  just  as  decided,  and  when 
Higgins  reminded  him  of  the  many  times 
he  had  gone  to  the  rescue  of  institutions  in 
distress,  the  financier  shook  his  head  grimly. 
"I've  got  to  stop  somewhere,"  he  said. 
He  was  willing  to  let  this  trust  company 
suffer  the  consequences  of  its  mismanage 
ment  ;  and  the  actions  of  some  failed.  With 
his  hat  on  the  back  of  his  head,  and  smok 
ing  his  usual  large  black  cigar,  he  sat  at  his 
desk  all  that  morning  and  awaited  events. 
The  Knickerbocker  was  quickly  drained  of 
its  cash  and  closed  its  doors.  To  J.  P.  Mor 
gan's  mind  this  was  in  a  sense  an  unimpor 
tant  incident,  rich  and  great  as  the  trust 
company  had  been.  He  was  thinking  of  the 
general  financial  situation  and  all  its  possi 
bilities;  he  knew  that  the  great  majority  of 
the  banks  of  New  York  were  in  a  position  to 
weather  any  storm  that  might  break,  but 
he  also  knew  that  it  would  be  necessary  to 
extend  assistance  to  a  large  number  of 
banks,  not  only  in  New  York,  but  through 
out  the  country,  banks  which,  although  pos 
sessing  assets  that  were  unquestionably 
good,  were  going  to  find  it  impossible  to 


THE  PANIC  OP  1907  299 

realise  upon  them  and  impracticable  to  call 
upon  their  customers  for  immediate  pay 
ment  of  their  loans,  since  the  customers 
simply  could  not  get  the  money  to  pay  with. 

As  he  sat  there,  in  came  a  gentleman, 
who,  without  being  announced,  opened  the 
gate  of  the  railing  which  surrounds  Mr. 
Morgan's  desk,  and  walked  up  to  him.  Mr. 
Morgan  nodded  and  said,  "Good  morning, 
Mr.  Prick."  The  two  men  sat  chatting 
quietly  for  a  few  minutes.  You  would  have 
thought  they  were  engaged  in  an  informal 
and  unimportant  conversation.  But,  in 
reality,  Prick  was  offering  millions  of  the 
highest  grade  of  securities  for  a  purpose 
that  Mr.  Morgan  had  in  mind. 

When  Prick  went  away  a  little  man 
came  in  with  a  quick,  nervous  step.  Mr. 
Morgan  greeted  him  with  a  nod ;  the  visitor 
was  E.  H.  Harriman,  who  also  offered  to  be 
one  of  a  group  who  would  extend  aid.  In 
a  similar  manner,  one  after  another,  some 
ten  or  fifteen  of  the  men  of  great  capital  in 
New  York  came  to  see  Mr.  Morgan,  and 
he  received  them  quietly  and  impassively, 
although  he  knew  that  these  men  came  to 
him  as  their  leader.  At  last,  James  Still- 


300        J.  PIERPONT  MORGAN 

man,  president  of  the  National  City  Bank, 
came;  receiving  a  most  casual  greeting,  he 
went  with  Mr.  Morgan  into  an  inner  room. 
Across  the  street,  at  the  Sub-Treasury, 
the  officers  were  obeying  instructions  sent 
them  by  the  Secretary  of  the  Treasury, 
George  B.  Cortelyou.  Cortelyou  was  pre 
pared  to  deposit  with  the  national  banks  of 
the  country  as  much  as  one  hundred  and 
fifty  millions  of  Government  money ;  but  it 
still  remained  a  question  how  the  banks 
were  to  furnish  the  security  required  by  law 
to  protect  deposits  of  this  kind.  Arrange 
ments  were  gradually  made  by  which  the 
banks  were  able  to  borrow  from  savings 
;  institutions,  and  from  private  owners,  Gov- 
/  ernment  bonds  in  large  amounts.  John  D. 
Rockefeller,  for  one,  handed  over  ten  mil 
lions  in  Government  bonds  without  interest. 
Some  twelve  millions  of  bonds  were  doled 
out  to  the  banks,  and,  meanwhile,  Mr.  Mor 
gan  and  Mr.  Stillman,  with  one  or  two 
others,  made  arrangements  to  buy  bills  of 
exchange,  chiefly  cotton  bills,  for  cotton  was 
the  article  exported  in  largest  quantities  at 
that  time;  having  these  bills  as  security, 
they  sent  cable  despatches  to  London  ask- 


THE  PANIC  OF  1907  301 

ing  for  the  immediate  remittance  of  gold. 
Through  this  means  the  National  City  was 
able  to  report  on  the  evening  of  the  crash  at 
the  Knickerbocker  Trust  that  it  had  secured 
some  eight  millions  of  gold  which  would  be 
immediately  shipped  to  the  United  States. 
The  national  banks  of  the  entire  country 
were  notified  that  they  could  have  Govern 
ment  deposits  up  to  the  limit  of  the  law, 
and  were  also  assured  that  Mr.  Morgan 
wrould  see  to  it  that  they  could  borrow  the 
bonds  necessary  to  secure  these  deposits. 

While  the  panic  was  still  at  its  height 
there  came  a  sudden  announcement  that  the 
United  States  Steel  Corporation  had  pur 
chased  a  majority  of  the  capital  stock  of 
the  Tennessee  Coal  and  Iron  Company,  and 
was  offering  to  buy  any  of  the  remaining 
shares  upon  the  same  terms  upon  which  the 
majority  block  had  been  secured.  This 
action  had  more  effect  than  anything  else 
in  dissipating  the  heavy  black  cloud  which 
was  hanging  over  the  banking  situation.  It 
virtually  ended  the  panic. 

To  this  day  there  lurks  a  suspicion  that 
this  transaction  really  explains  the  panic ;  it 
has  been  made  the  subject  of  two  Con- 


302        J.  PIERPONT  MORGAN 

gressional  investigations,  which  uncovered 
much  bad  feeling,  but  failed  to  dispose  of 
the  various  charges  in  a  decisive  way.  It 
is  perhaps  still  open  to  anyone  to  think  that 
Mr.  Morgan,  whose  whole  life  has  been  de 
voted  to  producing  stable  conditions  in  the 
money  market,  deliberately  engineered  a 
stupendous  financial  panic,  which  was  likely 
to  paralyse  business,  ruin  industry,  throw 
his  own  interests  into  confusion,  and  set  the 
country  back  ten  years  at  least,  simply  in 
order  to  buy  at  a  low  price  a  block  of  stock 
valued  at  seventeen  million  dollars.  Those 
who  hold  this  opinion  support  it  with  the 
fact  that  T.  C.  &  I.,  with  its  great  quantity 
of  ore  deposits  and  its  use  of  the  "open 
hearth"  process  in  making  steel,  was  an 
enormously  valuable  acquisition  to  the  Steel 
Corporation,  and  there  isn't  a  doubt  that 
it  was.  The  steel  people  asserted  at  the 
time  of  the  panic  that  they  did  not  want 
the  T.  C.  &  I.  and  were  only  taking  it  over 
to  relieve  the  situation.  But  before  many 
months  had  passed  President  Gary  of  the 
Steel  Corporation  was  out  with  a  statement 
setting  forth  the  great  value  of  the  acquisi 
tion  of  this  property.  Putting  aside  the 


THE  PANIC  OF  1907  303 

child's  talk  that  Mr.  Morgan  and  his  asso 
ciates  caused  a  nation-wide  panic  in  order 
to  grab  a  competing  steel  company,  it  is  fair 
to  conclude  that  although  their  first  thought 
was  to  relieve  the  strain  of  the  situation, 
they  were  by  no  means  sorry  to  accomplish 
this  result  with  future  advantage  rather 
than  future  expense  to  themselves ;  nor  was 
much  sympathy  spent,  it  is  likely,  upon  the 
group  of  speculators  who  got  caught  with  a 
collapsing  stock  on  their  hands. 

The  matter  was  the  subject  of  several 
noteworthy  conferences  which  took  place  at 
Mr.  Morgan's  library;  to  these  conferences 
came  in  the  small  hours  of  the  morning 
most  of  the  important  figures  in  the  Wall 
Street  district,  remaining  until  the  open 
ing  of  business  and  returning  again  in  the 
evening.  Nothing  like  these  meetings  had 
ever  taken  place  before;  it  was  a  strange 
scene — the  beautiful  interior  representative 
of  a  more  artistic  civilisation  than  ours  and 
graced  with  recondite  and  dearly  bought 
objects  of  art,  and  the  all-powerful  finan 
cier,  whose  voice  uttered  the  last  word  on 
every  practical  question,  but  who  spoke 
little,  and  even  seemed  to  listen  little,  to  the 


304        J.  PIERPONT  MORGAN 

others.  In  comes  Gary,  with  Lewis  Cass 
Ledyard  and  one  or  two  others  to  take  up 
the  T.  C.  &  I.  situation.  The  brokerage 
firm  of  Moore  &  Schley  had  pledged  six  mil 
lion  dollars  of  T.  C.  &  I.  stock  for  loans  from 
various  banks;  the  banks  had  called  these 
loans  and  were  insisting  that  Moore  & 
Schley  take  up  the  T.  C.  &  I.  stock.  Mr. 
Ledyard  then  says  that  there  is  no  possible 
way  to  prevent  the  failure  of  Moore  & 
Schley  and  the  failure  of  many  banks  as 
well,  except  to  purchase  this  stock.  And 
Mr.  Morgan  says  to  Gary : 

"I  don't  know  whether  the  United  States 
Steel  Corporation  can  afford  to  buy  this 
stock  or  not.  You  know  best  as  to  that.  If 
it  does  not  buy — if  the  United  States  Steel 
Corporation  or  someone  else  does  not  fur 
nish  relief — no  man  can  say  what  the  effect 
will  be  on  the  financial  situation  throughout 
the  country.  If  you  can  see  your  way  clear 
to  buy  it,  I  have  no  doubt  such  action  will 
relieve  the  situation.  I  will  turn  Mr.  Led 
yard  over  to  you  to  see  what  you  can  do." 

Gary  then  said  he  would  not  take  a  step 
in  the  matter  without  going  to  Washington 


THE  PANIC  OF  1907  305 

to  learn  the  attitude  of  the  President  and 
the  Department  of  Justice. 

"Have  they  any  right,"  asks  Mr.  Mor 
gan,  "to  say  whether  the  United  States 
Steel  Corporation  shall  buy  this  company  or 
not?" 

And  Gary  said,  "No,  they  have  no  such 
right.  But,"  he  went  on,  "here  is  a  finan 
cial  crisis ;  the  purpose  of  buying  this  stock 
is  to  overcome  the  panic,  and  if  the  Admin 
istration  should  find  out  that  we  are  doing 
this  and  should  enjoin  us  on  the  ground  that 
the  acquisition  of  the  stock  created  a  mo 
nopoly,  why  then  we  should  have  made  the 
financial  situation  ever  so  much  worse  in 
stead  of  having  bettered  it." 

"Then  go  to  Washington,"  said  Mr.  Mor 
gan.  "Have  a  special  train,  and  don't  lose 
a  moment's  time." 

President  Eoosevelt  and  Attorney-Gen 
eral  Bonaparte  received  Gary  and  Frick  at 
an  early  hour  the  next  morning,  and  after 
hearing  their  representations,  agreed  that 
the  Government  would  not  intervene.  The 
Tennessee  Coal  &  Iron  Company  was  then 
absorbed  into  the  steel  trust,  the  holders  of 


306        J.  PIERPONT  MORGAN 

the  stock  accepting  the  bonds  of  the  steel 
company  in  payment. 

Mr.  Morgan  then  turned  his  mind  to  an 
other  matter — the  situation  of  the  City  of 
New  York,  which  some  time  before,  as  we 
have  said,  had  failed  in  attempt  to  market 
its  bonds.  It  was  absolutely  necessary  for 
the  city  to  raise  money  to  pay  contractors 
engaged  in  very  important  public  works; 
some  of  these  contractors  were  in  danger  of 
immediate  bankruptcy,  and  some  of  them 
would  have  been  bankrupted  long  before 
had  it  not  been  for  the  toleration  of  their 
creditors  and  for  occasional  and  incidental 
assistance  obtained  from  banks.  By  the 
middle  of  November  the  strain  became  so 
desperate  that  Mr.  Morgan  was  appealed  to 
by  the  city  administration;  in  October  the 
banking  interest  had  come  to  him,  a  month 
later,  the  city.  Mr.  Morgan  insisted  that 
the  city  must  offer  the  bonds  at  a  rate  of  in 
terest  sufficiently  tempting  to  induce  the  un 
derwriting  of  the  bonds  under  the  shaky, 
panic  conditions  then  existing,  for  it  would 
be  necessary  to  resort  to  highly  artificial 
means  involving  the  use  of  clearing  house 
certificates  if  the  bonds  were  to  be  under- 


THE  PANIC  OF  1907  307 

written  at  all.  The  city,  therefore,  offered 
the  bonds  at  four  and  a  half  per  cent,,  and 
Mr.  Morgan  for  himself  and  his  associates 
underwrote  the  whole  block. 

The  change  from  panic  conditions  to  the 
normal  came  very  slowly,  but  within  six 
weeks  we  had  received  from  Europe  nearly 
a  hundred  millions  in  gold,  every  dollar  of 
which  was  sent  to  banks  in  various  parts  of 
the  country  to  enable  them  to  build  up  their 
legal  reserves  and  to  increase  their  loaning 
capacity.  Mr.  Morgan  constantly  advised 
the  bankers  of  the  country  to  take  care  of  all 
their  customers,  such  as  merchants  or  manu 
facturers  who  were  dependent  upon  the 
banks  for  money  with  which  to  carry  on 
their  business.  It  was  also  decided  that  the 
clearing  houses  of  the  United  States  should 
accept  good  assets  of  banks,  including  com 
mercial  paper,  and  upon  these  assets  issue 
clearing  house  certificates.  The  New  York  . 

Clearing    House    Association    issued   some  ^y 

forty  millions  of  certificates,  taking  high- 
grade  commercial  paper  as  security ;  and  Mr. 
Morgan  ?s  prediction  that  paper  of  this  kind 
would  be  found  as  good  a  security  as  Gov 
ernment  bonds  was  afterwards  justified ;  not 


308        J.  PIERPONT  MORGAN 

one   dollar  of  this   commercial  paper  de 
faulted. 

The  after  history  of  the  Knickerbocker 
Trust,  which  met  and  went  down  under 
the  first  blow  of  the  panic,  is  interesting 
on  account  of  the  way  Mr.  Morgan's  son- 
in-law,  Herbert  L.  Satterlee,  effected  its  re 
habilitation.  He  was  very  materially  aided 
by  Messrs.  Bourne,  Tucker,  Boissevain,  and 
Hollins,  who  raised  the  large  sum  which  the 
court  decreed  that  the  company  must  have 
on  hand.  The  company  closed  its  doors  at 
noon,  October  22,  1907.  It  opened  them 
again  March  26,  1908,  without  the  loss  of 
its  solvency.  In  the  meantime  there  were 
nearly  forty-seven  millions  of  deposits 
locked  up.  Mr.  Satterlee,  at  the  head  of  a 
committee  of  depositors,  undertook  to  ob 
tain  the  consent  of  practically  all  the  de 
positors  to  their  plans,  and  received  from 
the  courts  time  in  which  to  do  this.  The 
alternative  would  have  been  an  immediate 
liquidation  of  the  company's  assets,  which 
at  the  prices  then  prevailing  would  have 
meant  great  losses ;  but  it  was  an  enormous, 
taxing  and  at  times  very  exciting  labour  to 
persuade  the  depositors  to  come  into  the 


THE  PANIC  OF  1907  309 

agreement.  On  the  day  the  company  opened 
it  received  two  millions  of  deposits  against 
half  a  million  withdrawal. 

Before  this  panic  of  1907  the  public  had 
gained  the  impression  that  Mr.  Morgan 
was  a  retired  capitalist;  the  events  of  that 
autumn  completely  altered  their  opinion. 
And  from  that  time  on  the  public  watched 
the  great  man  of  Wall  Street  with  in 
creased  interest  and  curiosity.  Not  merely 
the  man  himself  and  the  ramifications  of 
his  influence  and  power  absorbed  their  at 
tention,  but  also  the  organisation  which 
he  had  built  up  at  Number  23  Wall  Street, 
which,  beside  being  the  most  conspicuous 
banking  house  in  America,  was  destined 
to  carry  on  in  the  future  the  work  of  J. 
P.  Morgan's  life.  This  firm  now  consists 
of  ten  members,  J.  Pierpont  Morgan,  J. 
Pierpont  Morgan,  Jr.,  Edward  T.  Stotes- 
bury,  Charles  Steele,  Henry  P.  Davison, 
Temple  Bow^doin,  Arthur  E.  Newbold, 
William  P.  Hamilton,  William  H.  Porter 
and  Thomas  W.  Lament.  They  were  all 
selected  by  Mr.  Morgan  himself,  and  hi 
times  past  his  partners  have  always  been 
selected  by  him,  on  his  own  personal  judg- 


310        J.  PIERPONT  MORGAN 

merit.  Some  of  them,  like  Lamont  and  Da- 
vison,  belong  to  the  younger  generation; 
these  two  men  in  particular  were  brought 
in  from  the  banking  field  and  have  aided  in 
the  work  of  expanding  the  firm's  banking 
connections  and  control,  which,  more  than 
anything  else,  is  the  characteristic  policy 
and  aim  of  J.  P.  Morgan  &  Co.  to-day. 
For  with  the  panic  of  1907  a  new  era  be 
gan  for  the  Morgan  house;  it  has  changed 
with  the  times ;  and  the  secure  trend  of  the 
times  being  less  toward  building  new  in 
dustrial  creations  than  toward  safeguarding 
and  refining  upon  the  possibilities  of  those 
we  have,  the  Morgan  organisation  is  now 
on  the  road  to  becoming  the  one  powerful 
factor  in  the  world  of  banking  and  credit, 
in  which  position  its  influence  upon  all 
bu&iness  will  be  more  decisive  than  ever. 
Since  1907  Morgan  and  Company  has  put 
off  its  character  as  a  huge  promotion  house 
and  has  taken  on  the  functions  of  a  great 
bank.  It  is  thus  attaining  a  position  at 
once  removed  and  secure  at  a  time  of  po 
litical  and  social  readjustment  which  prom 
ises  to  be  the  most  far-reaching  the  country 
has  ever  known. 


CHAPTER  XV 

THE   MAN   HIMSELF 

IT  is  to  J.  Pierpont  Morgan,  of  all  living 
Americans,  that  the  expression  of  a  fa 
mous  French  historian  is  best  applied — a 
force  of  nature;  that  is  what  he  is,  or,  it 
may  be  better  to  say,  that  is  what  is  in  him ; 
an  immense  and  unruly  power,  which  is  only 
increased  by  the  obstacles  standing  in  its 
way.  His  personality  is  sometimes  com 
pared  with  that  of  Theodore  Roosevelt, 
because  both  are  masterful  men,  who  over 
come  circumstances  and  silence  opposition 
with  crushing  ease.  Each  has  proved  his 
possession  of  a  mysterious  force,  an  uncon 
scious  force,  capable  of  producing  tremen 
dous  results.  But,  after  that,  they  really 
resemble  each  other  as  little  as  a  journalist 
resembles  a  man  of  science,  or  an  evangelist 
the  merchants  who  are  financing  his  cam 
paign. 

All  the  personal  expansiveness,  the  van- 

311 


312        J.  PIERPONT  MORGAN 

ity,  of  the  politician  are  replaced  in  the  man 
of  capital  by  an  aloofness  that  is  predeter 
mined  and  an  equally  settled  and  ingrained 
habit  of  avoiding  every  opportunity  of  pos 
ing  before  the  crowd.  If  there  is  a  single 
man,  woman,  or  child  in  the  United  States 
who  has  not  held  the  hand  of  Colonel  Roose- 
velt,  it  is  not  Colonel  Roosevelt's  fault. 
Everyone  knows  how  approachable  he  is, 
how  friendly;  that  he  takes  the  same  nai've 
pleasure  in  saluting  a  Swedish  emigrant 
woman  at  a  backwoods  railway  station  in 
Wisconsin  as  his  friend,  Jacob  Riis,  takes 
in  returning  the  greetings  of  the  children  of 
the  slum.  The  flash  of  pleasure  and  the 
look  seem  very  personal;  popularity  fol 
lows  the  giver;  and  yet  it  needs  not  to  be 
said  that  there  are  men  who  could  not  put 
on  the  free  and  easy  manner  if  they  would, 
and  who  would  not  if  they  could.  It  is  not 
a  question  of  calling.  The  late  E.  H.  Har- 
riman  knew  everybody  in  Wall  Street,  and 
everybody  knew  Harriman.  Jay  Cooke, 
Mr.  Morgan's  predecessor  in  the  field  of 
great  banking,  was  no  mean  rival  of  P.  T. 
Barnum,  when  it  came  to  personal  adver 
tising.  And  there  are  statesmen  at  Wash- 


THE  MAN  HIMSELF  313 

ington  whose  disengaged  air  makes  the  blood 
of  a  visitor  run  cold.  It  is  a  question  of 
pride.  Everything  indicates  that  Mr.  Mor 
gan  is  personally  much  too  proud  to  be 
called  a  very  good  democrat;  if  the  success 
of  his  life  work  had  in  the  least  depended 
upon  cultivating  the  friendship  of  the  com 
mon  people,  he  would  surely  have  failed. 

It  is  said  there  are  scarcely  fifty  men  in 
the  financial  district,  who  have  a  speaking 
acquaintance  with  Mr.  Morgan.  Whether 
the  number  is  correct  or  not  it  is  certain 
that  his  acquaintance  is  relatively  small, 
and  that  his  real  friendships  are  reserved 
for  a  very  few  people,  chiefly  the  men  whom 
he  has  known  all  his  life  and  with  whom  he 
is  very  likely  not  associated  at  all  in  a  busi 
ness  way.  His  dislike  of  having  a  meaning 
less  fuss  made  over  him  by  strangers  is 
shown  by  his  never  appearing  at  public 
meetings  and  by  his  perennial  irritation  at 
the  never-say-die  reporters  and  camera  men 
who  unfailingly  close  in  upon  him  when  he 
is  sailing  or  returning  from  across  the 
water.  In  London  he  insists  upon  not  be 
ing  noticed  when  he  comes  in  or  leaves  his 
office,  and  has  stopped  the  custom  of  show- 


314        J.  PIERPONT  MORGAN 

ering  him  with  deferential  bows  which  was 
long  clung  to  by  his  employees.  When  he 
drives  up  to  his  house  or  his  office  in  New 
York  he  is  out  of  his  cab  or  automobile  and 
into  the  building  in  two  strides,  swift  and 
purposeful.  Anyone  who  hoped  to  inter 
cept  him  would  carry  away  nothing  from 
the  attempt  but  the  mental  impression  of  the 
financier's  air  of  extraordinary  vigour  and 
the  recollection  of  the  intent  and  piercing 
expression  of  his  eyes,  fixed  straight  before 
him. 

An  account  of  the  personal  traits  of  a 
living  man  tends  to  become  a  piece  of  vivi 
section,  more  or  less  unwarranted,  unless 
the  aim  is  to  suggest  his  personality,  rather 
than  to  analyse  it  exactly.  Mr.  Morgan's 
imposing  style  and  the  extraordinary  sense 
of  vigorous  life  which  emanates  from  him 
always,  make  him  a  personality  which  sug 
gests  itself,  as  a  matter  of  fact,  in  every- 
tljing  he  does,  whether  it  is  a  matter  of 
adding  to  his  collection  some  very  desirable 
picture  or,  piece  of  china  or  of  straighten 
ing  out  the  affairs  of  an  all  but  ruined  bank. 
It  is  a  personality  of  the  Olympian  order, 
incapable  of  doubt  and  indecision,  as  simple 


THE  MAN  HIMSELF  315 

in  action  as  a  thunderbolt  and  as  little  to 
be  argued  with.  The  effects  of  his  instan 
taneous  decisions  often  surpass  those  of  the 
most  deeply  laid  plans ;  no  important  factor 
has  been  overlooked;  no  objection,  on  the 
other  hand,  has  been  seen  out  of  proportion ; 
in  his  mind's  eye  he  sees  both  the  end  and  the 
way  to  reach  it,  and  after  all  has  been  cred 
ited  that  need  be  credited  to  the  painstaking 
labour  and  preparation  of  his  partners,  it 
remains  true  that  the  touch  of  the  marvel 
lous  which  stamps  his  success  and  the  suc 
cess  of  his  firm  is  due  to  Mr.  Morgan's  own 
genius. 

The  undebatable  quality  of  his  decisions 
reminds  us  he  was  almost  bred  a  mathe 
matician.  While  at  Gottingen  Morgan 
specialised  in  mathematics,  and  with  the 
professor  of  mathematics  he  would  spend 
long  hours  at  problems.  About  ten  years 
ago  a  number  of  New  Yorkers  who  had  been 
at  the  Gottingen  University  together  held.. a 
dinner  and  invited  their  old  professor  of 
mathematics,  who  happened  to  be  visiting 
this  country,  to  be  present.  The  German 
stood  his  ground — he  gave  them  his  own 
idea ;  looking  at  Mr.  Morgan  he  said  that  he 


316        J.  PIERPONT  MORGAN 

was  indeed  very  glad  Ms  old  pupil  had  suc 
ceeded  so  well  as  a  banker.  "But  I  re 
gret,"  lie  went  on,  "that  you  did  not  remain 
at  the  university.  Had  you  stayed  with  me 
you  would  have  been  my  assistant  as  long  as 
I  lived,  and,  unquestionably,  at  my  death 
you  would  have  been  appointed  professor 
of  mathematics  in  my  place." 

Perhaps  the  old  German's  disappointed 
notion  of  seeing  J.  P.  Morgan  a  professor 
of  mathematics  is  not  so  quaint  as  it  sounds ; 
it  is  worth  while  to  consider  him  in  the  light 
in  which  his  old  professor  saw  him — just 
long  enough  to  associate  with  his  person 
ality  some  of  those  very  definite  traits  for 
which  mathematicians  are  renowned.  As 
everyone  knows,  mathematicians  are  very 
"set"  in  their  ways  and  go  through  life 
upon  a  secure  basis  of  settled  notions ;  their 
love  of  precise  statement,  their  antagonism 
to  the  vague  and  indefinite,  their  some 
what  unsocial  reliance  upon  their  specialty 
as  comprehending  all  the  wisdom  of  the 
world — are  equally  well  known.  And  Mr. 
Morgan  is  at  least  half  a  mathematician. 
And  so  it  comes  about  that  the  opposite  and 
unmathematical  side  of  his  nature — his 


THE  MAN  HIMSELF  317 

faith  and  his  fire,  his  impenetrable  resolu 
tion  and  strength  in  action — relates  itself 
inevitably  to  matters  which  the  hand  can 
grasp,  the  eye  can  see;  to  a  beautiful  vase, 
a  promising  railroad,  a  business  combina 
tion  of  which  the  gain  is  as  sure  as  book 
keeping,  a  hospital  in  which  actual  ailing 
people  will  be  cared  for  by  actual  proficient 
doctors — but  not,  it  is  fair  to  say,  to  some 
political  or  social  enterprise  of  which  the 
benefits  are  doubtful  and  where  the  sin 
cerity  and  wisdom  of  the  chief  movers  re 
mains  to  be  demonstrated.  It  is  related 
that  upon  one  of  the  occasions  when  Mr. 
Morgan  dined  with  the  Kaiser,  the  Emperor 
Wilhelm  opened  the  subject  of  Socialism, 
and  was  surprised  to  find  that  his  guest  was 
not  in  the  least  interested  in  a  political 
movement  of  such  consequence. 

Mr.  Morgan's  habit  of  silence  is  one 
which  he  occasionally  breaks  himself,  some 
times  talking  a  great  deal,  either  on  the  sub 
ject  of  his  collections  of  books  and  pictures, 
when  he  meets  someone  whose  interest  has 
the  effect  of  drawing  him  out,  or  when  he 
chances  to  relate  the  story  of  some  event 
in  his  life.  The  latter  thing  he  rarely  does, 


318        J.  PIERPONT  MOEGAN 

even  in  the  midst  of  his  own  family.  One 
evening  when  he  was  dining  at  home  with 
his  wife  and  daughters  and  two  or  three  of 
his  friends  someone  asked  him  a  question 
about  his  negotiation  with  President  Cleve 
land  in  1895,  when  Mr.  Morgan  contracted 
to  stop  the  gold  from  flowing  out  of  the 
Treasury.  He  started  in  to  tell  the  whole 
story.  He  told  it  in  detail,  and  very  viv 
idly;  it  was  the  first  time  any  of  the  com 
pany  had  heard  what  really  happened  on 
that  exciting  and  dramatic  occasion.  Some 
of  them  had  been  going  to  the  opera  that 
evening;  the  ladies  had  even  begun  to  put 
on  their  wraps.  But  no  one  thought  any 
more  about  going  to  the  opera. 

One  summer  Mr.  Morgan's  son,  "Jack" 
Morgan,  invited  a  Harvard  classmate  to 
spend  the  night  at  Highland  Falls.  "My 
father's  coming  up  in  the  evening  on  the 
Corsair,"  he  wrote;  "just  get  aboard  and 
come  along  with  him."  The  guest  followed 
directions  and  found  that  gentleman  seated 
on  the  deck  in  an  arm-chair,  reading  a  news 
paper.  After  saying  who  he  was,  the  other 
pulled  out  a  paper  from  his  pocket  and  be 
gan  to  read,  too.  The  Corsair  moved  up  the 


.  f 

m 


lli 


V-  if  i  If  •  i 


.-. 


\ 


THE  MAN  HIMSELF  319 

Hudson,  and  both  continued  to  study  their 
newspapers  in  silence  until  the  thirty-mile 
journey  was  over.  "Jack"  Morgan  met 
them  at  the  landing  place,  and  his  father, 
happening  to  be  alone  with  him  for  a  mo 
ment,  remarked,  with  enthusiasm:  "That 
is  one  of  the  nicest  young  fellows  I've  met." 
Sometimes  the  Morgan  summer  place, 
Cragston,  at  Highland  Falls,  is  filled  with 
informal  parties  of  young  people  who  have 
drifted  over  from  neighbouring  houses; 
somewhere  a  little  apart  from  the  life  and 
movement  may  be  seen  Mr.  Morgan,  sitting 
in  a  wide-armed  chair,  self-absorbed,  and 
outwardly  chiefly  interested  in  his  cigars, 
of  which  he  lights  one  after  another. 

His  taciturnity  and  his  love  of  mental 
privacy  are  extraordinarily  marked ;  two  or 
three  years  ago,  as  trustee  of  the  Metropoli 
tan  Museum  of  New  York,  he  decided  to 
pay  a  visit  to  the  archaeological  work  in  the 
Great  Oasis  of  the  Sahara.  After  a  short 
stay  in  Cairo  he  chartered  the  Arabia, 
which  had  just  been  vacated  by  the  Princess 
Royal,  the  Duke  of  Fife,  and  their  daugh 
ters,  for  a  journey  up  the  Nile;  Mr.  Mor 
gan's  sister,  Mrs.  Burns,  and  his  daughter, 


320        J.  PIERPONT  MORGAN 

Mrs.  Hamilton,  went  with  him.  While  in 
Cairo  he  remained  in  his  suite  at  Shep- 
heard's  Hotel,  and  on  the  river,  he  was  safe 
in  the  beautiful  dahabiyeh  from  the  ques 
tions  of  reporters,  or  the  curiosity  of  travel 
lers;  but  there  was  a  young  Englishman  to 
whom  had  been  deputed  the  task  of  con 
ducting  the  party  on  the  special  train  from 
the  Nile  Valley  across  the  desert — and  this 
Englishman  related,  rather  minutely,  his  im 
pressions  of  the  journey  with  Mr.  Morgan 
and  the  shock  of  surprise  which  the  latter 
gave  him : 

"I  had  been  directed  to  take  charge  of 
Mr.  Morgan  and  his  party  in  the  special 
train  he  had  ordered  for  the  six-hour  jour 
ney  across  the  desert,"  said  the  young  Eng 
lishman,  "and  at  the  station  he  came  up  to 
me  and  in  a  jovial  manner  asked  me  how  I 
did.  This  introductory,  'How  do  you  do?' 
were  almost  the  only  words  he  said  to  me. 
For  the  rest  of  the  six  hours  he  scarcely 
uttered  a  syllable,  with  the  exception  of 
two  terse  questions  about  the  desert. 

"Throughout  the  entire  journey  he  ap 
peared  to  be  plunged  in  the  deepest  thought ; 
he  sat,  immersed  in  the  profoundest  con- 


THE  MAN  HIMSELF  321 

templation,  in  the  wicker-work  arm-chair 
in  the  little  saloon.  This  mood  of  silent 
thoughtfulness  was  the  more  surprising  to 
me,  because  the  journey  is  so  full  of  interest 
that  the  ordinary  traveller  asks  numberless 
questions  along  the  route.  After  leaving 
the  Valley  of  the  Nile  the  line  enters  a 
long  and  desolate  ravine  having  immense 
cliff-like  walls  of  grey  limestone,  and 
finally  climbs  to  the  weird  plateau  of  the 
Libyan  Desert.  Mr.  Morgan  was  left  en 
tirely  to  himself  during  this  journey;  no 
one  attempted  to  draw  his  attention  to  any 
thing.  Every  now  and  then  he  would  write 
out  a  cable  message,  which  was  sent  off  to 
the  main  line  by  telegraph  from  one  of  the 
little  huts  or  stations  on  the  line.  An  ex 
cellent  luncheon  was  set  before  him,  but  all 
he  took  was  an  egg  and  a  piece  of  bread, 
and  as  soon  as  the  egg  and  bread  were  fin 
ished  he  plunged  into  thought  again.  His 
only  distraction  was  smoking  big  cigars,  and 
he  must  have  got  through  a  good  number  of 
them  on  this  journey." 

Mr.  Morgan  owns  the  Santa  Clara  prov 
ince  in  Cuba,  where  a  particularly  dark  and 
fragrant  variety  of  tobacco  is  grown;  his 


322        J.  PIERPONT  MORGAN 

cigars  are  made  for  Mm  out  of  this  special 
leaf,  and  these  large  black  cigars  of  his 
figure  in  innumerable  anecdotes.  Here  is 
one  which  he  once  told  himself:  "I  was  go 
ing  aboard  the  yacht  and  found  that  I  had 
nothing  to  light  my  cigar  with;  so  I  ven 
tured  to  ask  one  of  the  men  on  the  pier  for 
a  match.  In  return  for  the  courtesy  I 
handed  him  one  of  my  cigars — which  I 
think  a  good  deal  of.  He  accepted  it 
promptly. 

66 ' Thanks  to  you,'  he  said,  'I  was  just  out 
of  tobacco.' 

"Then  he  broke  it  into  little  bits  and 
stuffed  it  into  his  pipe!" 

The  estate  at  Highland  Falls  shelters  at 
all  times  a  great  variety  of  live  stock ;  a  few 
years  ago  the  Morgan  collies  competed  in 
every  notable  show  and  carried  off  the 
prizes,  and  there  were  from  eighty  to  a  hun 
dred  of  these  beautiful  and  terribly 
lively  animals  barking  and  running  about 
in  their  inclosure  quite  near  the  house  itself. 
Collies  love  to  gallop  together  and  bark — 
even  more  than  other  dogs ;  and  eventually, 
partly  to  do  away  with  the  noise,  the  collie 
establishment  was  reduced  and  Mr.  Morgan 


THE  MAN  HIMSELF  323 

went  in  for  blooded  cattle.  The  animals  of 
his  herd  are  all  catalogued  by  number  and 
the  owner  occasionally  strolls  out  to  their 
quarters,  catalogue  in  hand  and  calls  for 
number  so-and-so  to  be  led  out  before  him, 
looking  the  animal  over,  studying  it  as  he 
does  a  picture  or  any  other  beautiful  and 
perfect  piece  of  work. 

In  his  youth  Mr.  Morgan  was  fond  of  rid 
ing  horseback;  afterwards  he  took  up 
yachting,  and  was  for  several  years  Com 
modore  of  the  New  York  Yacht  Club — his 
intimate  friends  address  him  as  "  Commo 
dore"  still.  He  built  the  Columbia  to  de 
fend  the  America's  cup,  and  was  a  member 
of  the  syndicates  that  built  the  other  cup  de 
fenders.  In  the  intermissions  of  his  busi 
ness  life  when  in  this  country  he  goes 
aboard  the  Corsair,  and  stays  there;  and  the 
yacht  takes  him  to  Cragston,  to  Newport, 
for  a  day's  fishing,  or  to  Bar  Harbour,  or 
simply  cruises  over  the  sea,  with  no  destina 
tion.  Of  bodily  exercise,  Mr.  Morgan 
never  has  been  fond,  with  the  one  exception 
of  horseback  riding;  at  one  time  he  forced 
himself  to  work  with  dumb-bells  and  ap 
paratus,  being  under  the  impression  that 


324        J.  PIEKPONT  MORGAN 

his  health,  which  was  feeli|^the  strain  of 
business,  ^vould  be  benefitecT  His  physi 
cian,  however,  advised  him  to  drop  all  that 
sort  of  gymnastics,  on  the  ground  that  it 
was  contrary  to  the  habits  of  a  lifetime; 
and  since  then  Mr.  Morgan  has  worked  with 
his  brain  alone,  eaten  and  smoked  as  he 
pleased — and  his  strong  Yankee  constitu 
tion  has  carried  him  through.  There  is  a 
prevailing  medical  theory  that,  not  mere  va 
cations,  but  variety  of  occupation  and  in 
terests,  especially  when  coupled  with  travel, 
will  enable  one  to  work  at  high  pressure 
longer  than  anything  else;  Mr.  Morgan's 
life  is  an  argument  in  support  of  this 
theory.  His  business,  from  the  very  be 
ginning,  has  involved  two  or  three  trips 
abroad  each  year ;  and  on  his  journeys  over 
Europe  the  appeal  of  art  and  the  excitement 
of  a  collector  increased  the  interest  and 
variety  of  his  life  until  there  was  no  time 
for  stopping  to  become  ill. 

Rome,  London,  Paris,  and  New  York  see 
him  for  a  portion  of  each  year.  From  Lon 
don  the  greatness  of  the  Morgan  banking 
business  may  be  said  to  have  taken  its  rise, 
for  it  was  begun  through  Junius  Spencer 


THE  MAN  HIMSELF  325 

Morgan's    succession    to    the    business    of 


George  Peab;  and  when  Pierpont  Mor 
gan  began  for  himself  in  New  York  he  had 
the  great  advantage  not  only  of  a  training 
in  his  father's  house,  but  also  received  its 
American  business. 

In  England  Mr.  Morgan  has,  beside  his 
London  office,  his  mansion  at  Prince's  Gate, 
in  which  he  had  placed  art  treasures  from 
every  corner  in  Europe,  his  place  at  Putney, 
and  another  house  in  Grosvenor  Square. 
The  Prince's  Gate  residence  consists  of  a 
four-story  mansion,  which  stands  on  a  cor 
ner,  with  its  front  windows  opening  on 
Hyde  Park,  not  far  from  the  famous  Albert 
Memorial.  In  recent  years  he  has  added  an 
art  gallery,  consisting  of  an  adjoining  man 
sion  of  almost  equal  size.  The  entire  inside 
of  this  building  was  reconstructed;  one  of 
the  stories  at  the  top  was  taken  out  and 
the  first  floor  was  raised,  so  that  the  space 
from  floor  to  ceiling  was  doubled.  After 
the  whole  building  had  been  rebuilt  to  an 
swer  to  the  needs  of  a  modern  art  gallery 
it  was  filled  with  every  sort  of  beautiful  and 
artistic  wo."k,  from  tiny  miniatures  set  in 
little  jewelled  frames  to  great  paintings  by 


326        J.  PIERPONT  MORGAN 

old  masters,  ancient  church  ornaments, 
tapestries,  porcelain,  books,  and  manu 
scripts. 

There  were  discontented  Americans  who 
used  to  complain  because  Mr.  Morgan  left 
so  many  of  his  art  possessions  in  England. 
The  former  Secretary  of  the  Treasury,  Les 
lie  A.  Shaw,  once  asked  him  point  blank 
why  he  did  not  bring  his  pictures  and 
miniatures  and  other  beautiful  things  to 
America,  where  the  American  people  might 
have  a  look  at  them. 

Mr.  Morgan  said:  "I  can't  afford  to." 

"I  knew  you  were  a  poor  man,"  said 
Shaw,  "but  I  didn't  realise  you  were  as 
poor  as  that." 

"Mr.  Shaw,"  returned  Morgan,  "how 
much  do  you  suppose  the  duties  on  my  col 
lections  would  amount  to  if  I  should  bring 
them  to  New  York?" 

"Perhaps  two  or  three  hundred  thou 
sand." 

"They  would  amount  to  at  least  six  mil 
lions." 

There  are  agents  in  Antwerp,  Vienna, 
Paris,  Brussels,  Rome — in  fact,  in  almost 
every  Continental  city,  whose  business  it  is 


THE  MAN  HIMSELF  327 

to  buy  for  Mr.  Morgan  whatever  they  judge 
is  a  masterpiece.  From  time  to  time  they 
receive  special  and  urgent  instructions  to  be 
on  the  lookout  for  some  special  piece  which 
is  needed  to  complete  a  collection.  Some 
times  Mr.  Morgan  gets  what  he  wants 
through  pure  luck,  as  in  the  following  ex 
ample  : 

He  had  long  possessed  an  incomplete  set 
of  Sevres  for  the  mantel;  there  were  five 
pieces  in  the  original  set,  but  Mr.  Morgan 
had  only  succeeded  in  obtaining  four,  and 
not  in  all  Europe  had  he  been  able  to  lay  his 
hands  on  the  missing  fifth  piece.  One  even 
ing,  just  as  he  was  sitting  down  to  dinner 
in  the  house  at  Prince's  Gate,  a  servant 
brought  word  that  a  man  was  standing  at 
the  door  with  a  parcel,  the  contents  of 
which  he  said  Mr.  Morgan  would  be  greatly 
interested  to  see.  The  financier's  first  im 
pulse  was  to  send  him  away ;  then  a  curious 
feeling  came  over  him  and  he  called  after 
the  servant  to  show  the  man  up.  The 
stranger  placed  in  his  hands  the  missing 
fifth  piece  of  Sevres. 

"You  want  to  sell  this?"  asked  Mr. 
Morgan,  placing  it  on  the  table  beside  him. 


328        J.  PIEKPONT  MORGAN 

"Yes,  you  can  buy  it." 

"What's  the  price?" 

The  man  named  a  large  sum,  which  was 
paid  him  just  as  soon  as  the  cash  could 
be  obtained.  Taking  a  receipt  Mr.  Morgan 
asked  him  with  a  little  curiosity : 

"What  made  you  bring  this  piece  to 
me?" 

"Well,  I  had  heard  of  you  as  a  buyer  of 
good  things,"  was  the  reply,  "and  this  is  a 
very  fine  piece  of  Sevres." 

"I  know  that,"  said  Mr.  Morgan. 

It  had  been  pure  chance,  after  all. 

The  collections  of  miniatures  in  this  gal 
lery  surpass  any  collection  of  portraits 
ever  brought  together  before;  it  is  an  as 
semblage  of  the  beauties  and  the  princes  of 
two  centuries ;  out  of  scores  of  great  names 
here  are  a  few :  Charles  the  Second,  Charles 
the  First  as  a  youth,  Louis  the  Fourteenth 
on  horesback,  Mme.  de  Montespan,  Mme.  de 
Pompadour,  Marie  Antoinette,  the  Princess 
de  Lamballe,  the  Duchess  of  Devonshire, 
George  the  Fourth  as  Prince  Regent.  The 
oldest  miniature  is  a  portrait  of  Mary, 
Queen  of  Scots,  by  an  unknown  painter, 
which  at  one  time  belonged  to  Charles  the 


THE  MAN  HIMSELF  329 

First,  and  bears  Ms  initials.  Mr.  Morgan 
caused  to  be  made  a  wonderful  book  of 
these  miniatures,  on  the  vellum  pages  of 
which  each  portrait  has  been  exactly  repro 
duced  by  hand  in  the  colours  of  the  orig 
inal.  One  copy  he  presented  to  Queen 
Alexandra,  who  afterwards  came  herself  to 
Prince's  Gate  to  see  the  originals  and  Mr. 
Morgan's  other  collected  works  of  art. 

In  1902,  Mr.  Morgan,  by  a  single  purchase 
of  about  seven  hundred  books  and  manu 
scripts,  placed  his  collection  in  the  front 
rank  in  this  sort.  The  price  paid  was  a 
quarter  of  a  million  pounds  sterling,  and 
among  these  acquisitions  were  one  hundred 
and  eleven  illuminated  manuscripts- 
French,  English,  German,  Dutch,  Italian, 
and  Spanish — all  remarkable  examples  of 
antique  ornamentation  and  hand  writing. 
Among  them  was  the  Huntingfield  Psalter, 
a  manuscript  on  vellum,  containing  ninety- 
two  miniatures  of  scenes  from  the  Bible  and 
the  lives  of  the  saints,  which  was  executed 
at  Mendham  Priory  toward  the  end  of  the 
twelfth  century.  A  wonderful  French 
manuscript  is  a  Roman  de  la  Rose,  dating 
from  about  1380,  filled  with  miniatures  of 


330        J.  PIERPONT  MORGAN 

rare  execution.  Another  is  the  Bourbon 
Book  of  Hours,  done  in  1485  for  Charles  de 
Roussillon,  grandson  of  Charles,  of  Bour 
bon,  and  cousin  to  the  Prince  de  Conde,  who 
afterward  owned  it  and  whose  bookplate 
it  bears.  Another  Book  of  Hours,  of  Flem 
ish  execution,  was  bound  for  Mary  Stuart, 
Queen  of  Scots  at  the  time  of  her  marriage. 
In  the  collection  are  over  two  hundred  ex 
amples  of  the  earliest  press  work  of 
Germany  and  the  Low  Countries.  Mr. 
Morgan  already  had  the  celebrated  Guten 
berg  Bible  and  the  Psalter  of  1459,  which 
long  held  the  distinction  of  being  the  most 
valuable  books  in  the  world.  Year  by  year 
he  has  added  to  this  collection,  a  library  at  a 
time,  buying  what  he  personally  likes  and 
understands. 

Some  extraordinary  pieces  of  old  English 
plate  have  passed  into  the  Prince's  Gate 
treasure  house  from  the  great  auction  sales 
held  in  London  within  recent  years.  From 
the  time  of  Henry  the  Eighth  to  the  reign 
of  Charles  the  First,  the  Crown  possessed 
the  most  valuable  collection  of  royal  plate 
in  Europe,  but  the  misfortunes  of  the  latter 
monarch  compelled  him  to  dispose  of 


THE  MAN  HIMSELF  331 

practically  all  this  priceless  gold  and  silver 
plate  for  the  purpose  of  raising  money- 
it  was  all  melted  down  by  order  of  King 
Charles  and  turned  into  coin.  The  present 
collection  at  Windsor  Castle  contains  only 
two  specimens — a  rose  water  dish  and  ewer 
—older  than  the  time  of  Charles  the  First. 
But  Mr.  Morgan  has  a  Tudor  bowl  made  in 
London  when  Shakespeare  wras  alive;  a  set 
of  " Apostle"  spoons,  dating  from  the  reign 
of  Henry  the  Eighth ;  a  cup  and  cover  made 
shortly  after  the  accession  of  James  the 
First  out  of  the  silver  of  the  great  seal  of 
Ireland.  He  has  a  great  silver  tankard 
plain  and  massive  and  capacious,  which 
was  presented  by  Queen  Mary  to  Simon 
Janszen  for  safely  conveying  her  husband 
William  III.,  across  to  The  Hague  in  1691. 
On  the  cover  is  modelled  a  sitting  lion,  and 
on  the  front  are  engraved  the  royal  arms; 
an  inscription  in  Dutch  commends  Simon 
to  the  remembrance  of  His  Majesty  "when 
he  this  cup  to  his  lips  doth  lift."  A  fine 
example  of  a  massive  silver  vase  is  deco 
rated  with  the  portraits  of  Roman  emperors, 
and  contains  three  panels,  depicting  the 
finding  of  Eomulus  and  Kemus,  Mettus 


332        J.  PIERPONT  MORGAN 

Curtius  leaping  into  the  pit,  and  ^Eneas 
carrying  Ms  father,  Anchises,  from  the 
burning  city  of  Troy. 

To  turn  from  his  collections  to  his  busi 
ness  is  for  Mr.  Morgan  merely  a  matter  of 
jumping  into  a  cab,  of  which  there  are  al 
ways  two  or  three  waiting  near  his  door, 
and  driving  at  a  fast  pace  to  the  Morgan 
bank  on  Old  Broad  Street,  just  back  of  the 
Bank  of  England.  It  is  a  very  inconspicu 
ous  building,  jammed  in  among  a  number  of 
other  banking  concerns,  chiefly  noticeable 
among  the  buildings  of  dark  grey  stone  on 
account  of  its  lighter  colouring  of  cream- 
coloured  plaster.  But  inside  the  office  there 
is  always  a  marked  amount  of  bustle  and 
confusion,  contrasting  with  the  sedate  at 
mosphere  of  the  typical  London  institutions 
surrounding  it.  At  other  times  Mr.  Mor 
gan  is  driven  to  the  offices  of  his  shipping 
combination  in  Lindenhall  Street,  where 
there  exists  an  enormous  board  room,  with 
a  round  table  in  its  centre,  about  which  the 
directors  sit,  King  Arthur  style,  because  no 
one  is  supposed  to  possess  superior  powers 
over  the  rest  At  the  same  time  very  few 


THE  MAN  HIMSELF  333 

important  matters  are  decided  upon  when 
Mr.  Morgan  is  not  present. 

His  position  in  the  London  world  of  busi 
ness  is  his  father's  plus  the  vast  accretion 
of  power  and  influence  which  his  own  ener 
gies  and  successes  have  brought  to  it;  in 
London  Mr.  Morgan  operates  blind  pools 
just  as  he  does  in  New  York.  There  are  a 
number  of  firms  in  London  upon  whom  he 
can  call  at  a  moment's  notice  for  immense 
sums  of  money.  When  he  sends  out  a  brief 
request  for  a  few  millions  of  pounds  he  can 
depend  upon  receiving  the  money  without 
delay.  These  English  houses  are  as  glad 
to  come  in  on  anything  which  Mr.  Morgan 
organises  as  are  the  American  members  of 
his  syndicates,  and  they  never  ask  questions 
as  to  what  he  means  to  do  with  the  enormous 
funds  at  his  disposal. 

Between  J.  P.  Morgan  and  his  father  an 
interesting  comparison  might  be  made;  it 
is  perhaps  sufficient,  however,  to  remark 
that  Mr.  Morgan's  fondness  for  art  and  his 
love  of  collecting  were  direct  inheritances 
from  Junius  S.  Morgan.  In  Mr.  Morgan's 
library  in  New  York  there  hangs  a  vigorous 


334        J.  PIERPONT  MOEGAN 

portrait  of  his  father,  which  has  the  follow 
ing  curious  history: 

In  the  early  eighties  a  poverty-stricken 
American  walked  into  the  rooms  of  Agnew 
&  Co.,  the  celebrated  art  dealers  of  London, 
and  asked  for  Sir  William  Agnew.  Sir 
William  was  not  in,  and  the  salesman  asked 
the  man  what  he  wanted  of  him.  The 
American  gave  the  name  of  Bragard  and 
asked  for  the  loan  of  a  shilling. 

"Why  should  I  give  you  a  shilling?"  the 
clerk  asked. 

"Because  I  am  an  artist,"  replied  Brag 
ard,  "and  your  firm  has  made  a  great  deal 
of  money  through  us  artists — enough,  I  am 
sure,  to  warrant  my  request. " 

The  salesman  hinted  his  doubts  of  the 
man  being  an  artist,  whereupon  Bragard 
asked  for  a  pencil.  Then  he  began  to  copy 
a  portrait  which  was  hanging  on  the  wall, 
and  the  salesman  looked  on  in  amazement 
while  the  man  worked.  Bragard  showed 
he  was  indeed  an  artist,  and  that  he  was 
something  more  than  an  ordinary  artist; 
it  ended  with  the  clerk's  giving  him  five 
shillings  and  a  promise  to  try  to  interest 


THE  MAN  HIMSELF  335 

Sir  William  Agnew  in  getting  him  a  com 
mission. 

A  few  days  afterward,  Junius  S.  Morgan, 
who  was  an  old-time  patron  of  the  Agnew 
firm,  met  Agnew  and  was  induced  to  sit  for 
his  portrait  to  his  hard-pressed  fellow 
countryman.  The  young  man  said  the 
portrait  would  require  ten  sittings,  and  as 
the  work  progressed  it  caused  somewhat  of 
a  furore  among  London  connoisseurs;  in 
fact,  before  the  ten  sittings  were  completed 
Bragard  received  at  least  ten  thousand 
pounds  in  commissions  from  distinguished 
Londoners  for  their  portraits. 

When  Junius  Morgan's  portrait  was 
finally  finished  he  counted  out  five  hundred 
pounds  in  bills  and  handed  them  to  the  art 
ist.  "You  will  require  no  more  sittings 
from  me,  I  suppose?"  he  asked. 

Bragard  replied  that  he  was  not  perfectly 
satisfied  with  the  hands  and  would  like  one 
more  sitting  in  order  to  touch  them  up  by 
daylight. 

The  next  day  Mr.  Morgan  appeared  at  the 
studio  as  usual,  but  Bragard  failed  to  come. 
The  studio  remained  empty,  and  to  this  day 


336        J.  PIEKPONT  MORGAN 

there  has  not  been  discovered  the  slightest 
trace  of  the  artist.  His  name  was  probably 
assumed,  for  all  efforts  to  trace  him  or  to 
learn  where  he  came  from  proved  abso 
lutely  futile. 

It  was  like  J.  P.  Morgan's  father  to  order 
his  portrait  painted  by  an  artist  who  had 
more  talent  than  recognition,  and  it  was 
like  his  son  as  well;  perhaps  a  dozen  years 
later,  in  Paris,  the  American  financier  did 
something  of  the  same  sort.  It  had  been 
constantly  suggested  to  him  by  his  family 
and  friends  in  New  York  that  he  let  this 
or  that  artist  of  prestige  and  reputation 
paint  his  portrait.  Mr.  Morgan  never  took 
any  real  interest  in  these  suggestions;  he 
could  not  be  induced  to  set  aside  the  time 
for  the  necessary  appointments.  To  one 
portrait  painter  he  gave  a  single  sitting,  of 
an  hour — and  that  was  all.  But  one  morn 
ing  in  Paris  a  friend  dropped  in  to  see  him 
and  said  that  he  had  discovered  an  artistic 
genius  in  one  of  the  garret  studios  of  the 
Latin  quarter.  " Let's  go  and  see  his 
work,"  said  Mr.  Morgan,  and  they  spent 
the  rest  of  the  morning  looking  at  the  can 
vases  of  the  unknown,  admiring  them  so 


THE  MAN  HIMSELF  337 

greatly  that  Mr.  Morgan  commissioned  the 
artist  on  the  spot  to  come  over  to  New  York 
to  paint  his  portrait.  The  artist  came  the 
following  winter  and  Mr.  Morgan  gave  him 
all  the  sittings  needed  to  complete  the  pic 
ture,  which  now  hangs  in  his  library. 

On  another  visit  in  Paris  Mr.  Morgan 
heard  of  three  wonderful  tapestries  which 
were  for  sale  by  a  famous  dealer  in  an 
tiques.  The  tapestries  were  of  the  time  of 
Charles  the  Seventh,  historical  documents 
of  rare  value,  because  they  illustrated  with 
undoubted  accuracy  the  costumes  and  cus 
toms  of  that  distant  period.  Mr.  Morgan 
made  an  offer  for  them  on  behalf  of  the 
Metropolitan  Museum  of  New  York,  and  at 
about  the  same  time  the  directors  of  the 
Louvre  asked  for  an  option  on  the  tapes 
tries.  A  popular  agitation  was  begun  in 
the  newspapers  to  prevent  their  exportation 
from  France.  Mr.  Morgan  went  to  the 
antiquarian  and  said: 

"If  France  decides  not  to  buy  those.tapes- 
tries,  I  will." 

The  day  before  the  expiration  of  the 
French  option  the  seller  was  asked  to  ex 
tend  it  another  week,  A  Louvre  director 


338        J.  PIERPONT  MORGAN 

explained  that  it  was  hoped  that  by  that 
time  the  Minister  of  Fine  Arts  would  give 
his  consent  to  .the  purchase.  The  seller 
went  to  Mr.  Morgan  for  his  consent  to  this 
arrangement,  and  the  financier  promptly 
made  his  position  clear,  saying:  "It  is  not 
the  habit  of  the  Metropolitan  Museum,  nor 
is  it  my  habit,  to  prevent  such  an  institution 
as  the  Louvre  from  obtaining  what  it  wants 
of  the  works  of  art  of  its  own  country." 
He  added  that  he  would  gladly  consent  to 
the  extension  of  time. 

But  at  the  end  of  another  week  the  Min 
ister  of  Fine  Arts  still  contended  that  the 
price  was  too  high.  Mr.  Morgan  bought 
the  tapestries.  Ten  days  afterward  the  di 
rectors  of  the  Louvre  made  a  proposal  to 
Mr.  Morgan  to  buy  back  one  of  the  tapes 
tries.  Mr.  Morgan  replied  that  he  was  very 
sorry,  but  it  was  now  too  late. 

Each  time  he  goes  to  Rome  he  finds  him 
self  more  at  home,  more  and  more  an 
honourary  citizen  of  that  city  in  which 
centers  the  universal  movement  of  art  of  all 
times.  His  return  of  the  Ascoli  cope,  after 
he  had  learned  that  this  expensive  purchase 
had  been  stolen,  was  a  definite  act  of  a  sort 


THE  MAN  HIMSELF  339 

which  could  not  but  create  a  friendly  feel 
ing  toward  him  in  Italy ;  on  the  occasion  of 
the  artistic  festival  of  1911  he  was  invited 
to  accept  the  honourary  presidency  of  the 
foreign  committee  in  a  remarkable  letter,  in 
which,  after  referring  to  the  important  char 
acter  of  the  exhibition,  the  committee  said : 
"It  is  very  natural,  sir,  that  our  first  thought 
should  turn  to  you,  whose  enlightened  taste, 
profound  knowledge  and  generosity  with 
out  limit  have  made  you  the  most  enlight 
ened  Maecenas  of  our  times,  and  who  has 
given  Italy  living  proofs  of  sympathy,  for 
which  we  preserve  sincere  gratitude." 

To  return  to  Mr.  Morgan's  life  in  New 
York,  he  completed  in  1905  the  beautiful 
art  gallery,  known  as  his  " library,"  which 
stands  in  Thirty-sixth  Street  in  the  lot  be 
tween  his  own  residence  and  that  of  his  son- 
in-law,  Mr.  Satterlee.  The  building  is  in 
the  Italian  Renaissance  style,  in  white 
marble,  approached  from  the  street  by  a 
stone  walk,  which  cuts  through  a  vivid  ob 
long  of  green  lawn.  Once  inside  the  bronze 
doors  of  the  building  one  finds  oneself  in 
a  vaulted  entrance  hall  paved  with  Roman 
stones,  with  a  great  circular  piece  of 


340        J.  PIERPONT  MORGAN 

porphyry,  on  either  side  of  which  stands  a 
pair  of  Cipolino  columns  of  greenish  marble 
from  the  Chateau  de  Bagatelle  in  the  Bois 
de  Boulogne.  Through  a  central  double 
skylight,  of  glass  so  transparent  that  the 
blue  of  the  sky  is  seen  as  through  the  empty 
air,  the  light  falls  upon  the  walls  and  floor, 
and  is  reflected  back  to  the  creamy  decora 
tions  of  the  panels.  Around  the  octagon  of 
the  skylight  are  painted  the  Muses  of 
Art,  Science,  Literature,  and  Philosophy; 
there  are  groups  of  figures,  scriptural,  and 
allegorical;  the  backgrounds  are  of  Mosaic 
gold  and  the  general  background  of  the  ceil 
ing  is  gold,  bearing  a  tracery  of  graceful 
arabesques.  The  books  are  in  an  East  room, 
on  shelving  of  Circassian  walnut,  above 
which  are  medallion  portraits  on  a  back 
ground  of  gold — the  whole  bathed  in 
a  warm,  tempered  light  from  the  glass- 
panelled  ceiling.  In  this  beautiful  and 
expressive  building,  the  whole  effect  of 
which,  in  its  architecture  and  decora 
tions,  is  to  proclaim  the  spiritual  great 
ness  of  its  contents,  are  stored  books  and 
manuscripts  which  it  would  require  a  vol- 


MR.   MORGAN'S  HOUSE  ON   MADISON  AVENUE 
NEW  YORK  CITY 


THE  LIBRARY  IN  THIRTY-SIXTH  STREET,  ADJOINING 
THE  RESIDENCE  AT  THE  CORNER  OF  MADISON  AVENUE 


THE  MAN  HIMSELF  341 

ume  to  enumerate  and  several  volumes  ade 
quately  to  describe. 

To  mention  only  a  few,  and  of  hundreds 
of  manuscripts,  there  is  the  manuscript  of 
"Paradise  Lost,"  of  Keats'  "Endymion," 
Shelley's  notebook,  Pope's  "Essay  on 
Man,"  Lord  Byron's  "Don.  Juan,"  "The 
Corsair,"  "Marino  Faliero,"  Burn's  "Auld 
Lang  Syne,"  "Mary  Morrison,"  "Comin' 
Thro'  the  Rye,"  "Tarn  O'Shanter,"  "The 
Cotter's  Saturday  Night,"  the  manuscript 
of  a  poem  by  Swift  describing  Stella  at 
Wood  Park,  of  Scott's  "Waverley,"  "Ivan- 
hoe,"  "Anne  of  Geierstein,"  "Old  Mor 
tality,"  "Guy  Mannering,"  "The  Lady  of 
the  Lake,"  and  Scott's  own  journal.  Most  of 
the  famous  novelists  and  essayists  of  Eng 
lish  literature  in  the  nineteenth  century  are 
represented  in  the  collection — George  Eliot, 
Anthony  Trollope,  Charles  Reade,  the 
Brontes,  Macaulay,  Carlyle,  Ruskin.  Of 
American  authors  and  statesmen,  Poe, 
Whitman,  Hawthorne,  Thoreau,  Washing 
ton,  Adams,  Franklin,  Jefferson,  are  each 
represented  by  the  manuscripts  of  their 
major  works,  or  by  letters. 


342        J.  PIERPONT  MORGAN 

The  collection  and  preservation  of  such 
relics  of  past  greatness  as  these  manuscripts 
seems  properly  the  work  of  national  govern 
ments;  Mr.  Morgan  has  stepped  in  to  do 
what  the  Government  of  this  country  has 
not  been  particularly  efficient  in  doing,  and, 
besides  gathering  these  unreproducible  doc 
uments,  he  has  shown  how  they  should  be 
housed  and  cared  for,  in  safety  from  fire 
and  in  a  fit  artistic  setting.  His  gifts  to 
the  Metropolitan  Museum  of  Art,  not  only 
of  pictures,  but  of  an  entire  section  of  the 
Hoentschal  collection,  and  what  appears  to 
be  a  permanent  loan  of  the  famous  Garland 
collection  of  Chinese  porcelain,  are  well 
known.  His  native  city  of  Hartford, 
Conn.,  has  frequently  received  evidences  of 
Mr.  Morgan's  interest  in  his  birthplace. 
His  father  before  him  had  made  gifts  to 
the  public  institutions  in  Hartford,  and  at 
one  time  both  father  and  son  made  impor 
tant  gifts  to  the  Wadsworth  Athenaeum, 
which,  in  the  old  days,  was  a  reading-room 
and  gathering  place  for  lectures  of  a  liter 
ary  or  artistic  character.  In  1890  a  plan 
was  set  on  foot  to  broaden  the  usefulness  of 
the  old  Athenaeum,  and  Mr.  Morgan  then 


THE  MAN  HIMSELF  343 

announced  that  he  would  give  six  hundred 
and  fifty  thousand  dollars  to  build  an  art 
gallery  as  an  addition,  to  be  known  as  the 
Junius  S.  Morgan  Memorial.  About  the 
only  stipulation  he  made  was  that  the  build 
ing  should  be  of  Knoxville  marble,  and  that 
the  plans  should  be  submitted  to  him. 
When  completed  he  presented  the  gallery 
to  the  city  with  many  pictures  and  curios. 

This  memorial  is  almost  the  only  one  of 
all  his  gifts  to  which  the  name  of  Morgan 
is  definitely  given;  the  common  custom  of 
philanthropists  of  associating  their  own 
name  and  fame  with  benefactions  has  never 
appealed  to  him;  all  his  life  he  has  been 
a  quick  and  ready  giver  of  enormous  sums 
or  of  objects  which  cost  enormous  sums, 
but  has  totally  neglected  to  advertise  him 
self  at  any  stage  of  the  proceedings;  his 
reticence  on  this  head,  as  upon  so  many 
other  matters,  is  one  of  the  strongly  marked 
elements  of  his  personality.  An  account  of 
his  gifts  would  produce  an  endless  cata 
logue — he  searches  Europe  for  its  art  treas 
ures,  brings  them  to  New  York  and  gives 
them  to  the  Art  Museum,  the  Historical 
Society,  and  the  Cooper  Union;  gives  a  col- 


344        J.  PIERPONT  MORGAN 

lection  of  the  manuscripts  of  Burns  to  the 
Liverpool  Library  and  the  Pan-American 
collection  of  gems  to  the  Museum  of  Nat 
ural  History  in  Paris ;  pays  the  yearly  gas 
bill  for  St.  Paul's  Cathedral  in  London, 
gives  a  million-dollar  plot  for  a  lying-in 
hospital  in  New  York,  and  then  builds  and 
finances  the  institution ;  gives  half  a  million 
to  the  cathedral  of  St.  John  the  Divine  in 
New  York,  a  million  to  the  Harvard  Med 
ical  School,  five  hundred  thousand  dollars 
to  the  Trades  Training  School,  another  half 
million  to  the  Loomis  Sanatarium,  a  hun 
dred  thousand  to  the  Y.  M.  C.  A.,  a  hun 
dred  thousand  to  the  public  library  at  Hoi- 
yoke,  Mass.,  a  new  parish  house  and  rectory 
for  St.  George's  Church  in  New  York,  of 
which  he  is  a  vestryman,  a  hundred  and 
twenty-five  thousand  for  saving  the  Pal 
isades  along  the  Hudson,  an  isolation  pavil 
ion  at  Aix-les-Bains — and  so  on  without 
end.  These  charities  are  personal — that  is, 
Mr.  Morgan  does  these  things  himself,  hav 
ing  no  secretary  or  bureau  of  any  kind  to 
attend  to  these  matters.  He  relies  on  his 
own  judgment  and  has  no  set  plan  for  giv- 


THE  MAN  HIMSELF  345 

ing,  the  only  conditions  which  have  to  be 
met  being,  apparently,  that  the  person  who 
comes  with  a  request  shall  impress  him  as 
a  man  able  to  carry  out  his  plans,  and  that 
the  undertaking  itself  shall  be  one  of  clear 
practical  usefulness. 

His  manner  of  granting  such  requests  is 
peculiar  to  him.  In  practical  matters  his 
manner  is  as  decisive  and  blunt,  and  his 
speech  as  laconic  as  that  of  a  military  com 
mander  in  the  midst  of  an  engagement ;  but 
the  people  whose  vanity  is  hurt  by  his  short 
ness  of  speech  and  inattentive  air  fre 
quently  find  that  the  injury  stops  there,  and 
that  he  is  in  reality  giving  them  what  they 
ask,  and  more.  He  was  called  upon  one 
day  by  a  physician  who  had  become  inter 
ested  in  the  problem  of  how  to  care  for  poor 
women  who  were  approaching  confinement. 
To  the  explanation  of  the  physician  Mr. 
Morgan  appeared  to  listen  impatiently;  he 
asked  one  or  two  brusque  questions.  Then 
he  said:  " Bring  me  your  plans  for  a  suit 
able  building  and  endowment  and  I'll  pro 
vide  the  money."  It  was  over  in  five  min 
utes,  and  just  when  the  visitor  thought  he 


346        J.  PIERPONT  MORGAN 

was  about  to  be  dismissed  with  a  curt  "No," 
his  request  involving  the  expenditure  of  a 
million  and  a  half  was  granted. 

Just  after  the  close  of  the  first  term  of 
William  R.  Grace  as  Mayor  of  New  York, 
he  became  much  interested  in  a  contem 
plated  philanthropy,  and  undertook  himself 
to  secure  subscriptions  sufficient  to  justify 
beginning  the  benefaction.  With  this  pur 
pose  in  mind  he  called  upon  Mr.  Morgan. 
He  did  this  all  the  more  readily  because  he 
remembered  that  Mr.  Morgan  was  one  of 
the  few  men  of  large  affairs  in  New  York, 
who,  while  he  was  Mayor,  had  never  asked 
for  any  patronage,  and  had  never  sought 
any  favours  for  himself  or  his  banking  firm 
from  the  city.  Mayor  Grace  stated  the 
nature  of  his  errand  to  Mr.  Morgan,  who 
answered  so  briefly  and  bluntly  that  Mayor 
Grace  felt  hurt.  He  turned  to  go  away 
without  another  word. 

"Where  are  you  going?"  said  Mr.  Mor 
gan. 

"I  am  going  to  leave  your  office.  You 
must  pardon  me  for  annoying  you  with  this 
matter." 

6 '  Wait  a  moment, ' '  said  Mr.  Morgan.    He 


THE  MAN  HIMSELF  347 

took  his  pen  and,  after  briefly  writing  some 
thing,  gave  the  paper  to  Mr.  Grace,  saying: 
"There,  take  that.  Come  in  again  when 
you  are  going  by  and  tell  me  how  you  are 
getting  on." 

The  paper  wThich  he  gave  to  Mr.  Grace 
was  a  check  for  five  thousand  dollars. 

After  George  W.  Perkins  came  to  New 
York  to  live  as  an  officer  of  the  New  York 
Life  Insurance  Company  he  selected  a  home 
at  Kiverdale-on-the-Hudson,  directly  op 
posite  the  beginning  of  the  Palisades.  Mr. 
Perkins,  with  others,  undertook  to  save  the 
Palisades  from  the  destructive  work  then 
under  way  by  quarrymen.  It  was  discov 
ered  that  it  would  be  necessary  to  buy  the 
holdings  of  the  men  who  were  working  the 
quarries,  and  Mr.  Perkins,  after  consulta 
tion  with  them,  found  that  it  would  be  pos 
sible  to  make  the  purchase  for  one  hundred 
and  twenty-five  thousand  dollars. 

In  order  to  secure  this  money  Mr.  Perkins 
decided  to  make  personal  appeal  to  several 
men  of  wealth.  His  first  call  was  upon  Mr. 
Morgan.  He  was  not  at  that  time  a  member 
of  Mr.  Morgan's  banking  house.  He  set 
forth  the  plan  by  which  it  was  hoped  it 


348        J.  PIERPONT  MORGAN 

would  be  possible  to  begin  the  work  of  secur 
ing  the  Palisades  so  that  ultimately  the 
whole  stretch  of  them  might  become  a  public 
park. 

"How  much  do  you  need?"  said  Mr.  Mor 
gan  bluntly,  and  Mr.  Perkins  told  him. 

"Well,  you  go  and  see  Rockefeller  and 
Stillman  and  some  others.  See  what  they'll 
give.  Then  you  can  come  back  to  me  and 
1 11  see  what  I '11  do." 

"But,  Mr.  Morgan,"  Mr.  Perkins  ven 
tured  to  say,  "I  had  hoped  you  would  lead 
off  the  subscription  list  and  then  it  would 
be  easy  for  me  to  secure  other  subscriptions 
in  sufficient  amount  to  raise  the  sum 
needed." 

"Oh,  well,"  said  Mr.  Morgan,  "put  me 
down  for  the  whole  amount." 

This  was  so  bluntly  said  and  with  such 
apparent  indifference,  as  though  the  whole 
matter  was  then  and  there  dismissed,  that 
for  a  moment  Mr.  Perkins  did  not  know 
what  to  say.  Mr.  Morgan  turned  to  his 
desk  and  took  up  other  business  as  though 
the  incident  was  closed ;  as  in  fact,  it  was. 

When  Dr.  Rainsford,  for  years  the  rec 
tor  of  St.  George's  Church,  of  which  Mr. 


THE  MAN  HIMSELF  349 

Morgan  was  and  is  a  member,  put  before 
Mr.  Morgan  his  plan  for  greatly  enlarging 
the  church  work  and  building  up  a  social 
influence  as  well  as  moral,  intellectual,  and 
technical  trade  auxiliaries  of  church  work, 
Mr.  Morgan  listened,  hardly  interposing  a 
remark.  At  last  he  said  in  his  quick  and 
what  is  often  called  his  brusque  manner, 
"Go  ahead,  meet  your  expenses  as  far  as  you 
can.  Then  bring  me  a  statement  every 
quarter  or  six  months  and  I'll  make  good 
any  deficit." 

In  this  way  began  one  of  the  strongest 
church  organisations,  doing  a  work  of  phi 
lanthropy,  morality,  and  education  to  be 
found  anywhere  in  the  world. 

These  are  things  which  Mr.  Morgan,  in 
his  incorrigibly  reticent  and  offish  way,  is 
constantly  doing.  His  failure  to  dramatise 
himself  in  the  role  of  giver  is  conspicuous; 
it  is  human  to  mingle  one's  sympathies  a 
little  with  the  grateful  recipient  of  favours, 
it  is  human  to  unbend  and  emotionalise  and 
soften  at  the  thought  of  one's  magnanimity 
and  greatness — everyone  who  has  given 
five  cents  to  a  beggar  knows  this  pleasure. 
But  Mr.  Morgan  has  remained  incorrigibly 


350        J.  PIERPONT  MORGAN 

unhuman  in  some  of  these  relations  with  his 
fellow  men;  it  seems  clear  that  he  has  a 
higher  regard  for  his  dignity  than  for 
others'  liking,  and  that  he  is  extreme  in 
this,  as  in  some  other  personal  traits;  that 
he  believes  when  a  thing  is  to  be  done  it 
should  be  done  without  fuss  or  impressive- 
ness,  and  that  no  occasion  of  the  sort  is 
really  an  " occasion"  at  all.  This  trait  of 
plainness  and  sternness  of  manner  and  bear 
ing,  if  he  had  not  carried  it  so  far,  would 
have  made  him  immensely  popular.  His 
aloofness  renders  that  impossible.  Never 
theless,  if  he  had  ever  undertaken  to  hold  a 
difficult  public  office,  so  great  is  the  admira 
tion  of  the  American  people  for  efficiency 
and  personal  force,  they  would  have  made 
him  a  hero  in  spite  of  himself. 

In  June,  1910,  Mr.  Morgan  received  the 
degree  of  LL.D.  from  Harvard  University. 
President  Lowell  presented  it  to  him  with 
these  words:  "John  Pierpont  Morgan, 
public  spirited  citizen,  patron  of  literature 
and  art,  prince  among  merchants;  who  by 
his  skill,  his  wisdom,  and  his  courage  has 
twice  in  times  of  stress  repelled  a  national 
danger  and  financial  panic. "  As  a  descrip- 


THE  MAN  HIMSELF  351 

tion  of  Mr.  Morgan's  special  place  in  Ms 
time  the  words  seem  inadequate,  because 
they  fail  to  take  account  of  the  Morgan  super 
quality  of  constructive  financial  genius.  To 
complete  the  characterisation  there  would 
need  to  be  added  something  like  this: 
"Who,  in  an  age  of  enormous  industrial 
progress,  when  the  character  of  industrial 
units  underwent  a  necessary  change,  did 
more  than  any  other  man  to  establish  the 
new  regime  on  a  sound,  permanent  basis." 

The  Morgan  influence  is  Mr.  Morgan's 
greatest  achievement,  the  authority  of  his 
methods  and  ideas,  and,  concretely,  the  au 
thority  of  his  banking  house.  When  Mr. 
Morgan  dies  there  will  still  be  Morgan; 
the  House  of  Morgan,  built  up  upon  his 
personality  and  credit,  will  not  at  once  suf 
fer  abatement  of  prestige  in  any  of  its  far- 
reaching  ramifications.  It  may,  indeed, 
begin  to  decline  in  time  if  his  son  and  the 
partners  of  his  selection  prove  unable  to 
keep  up  to  the  standard.  In  this  continu 
ing  and  permanent  Morgan  quality  is  to 
be  found  new  evidence  of  the  singularity 
and  essential  strength  of  the  man  himself. 
When  Harriman  died,  the  Union  Pacific, 


352        J.  PIERPONT  MOEGAN 

the  railroad  which  he  had  chiefly  made  his 
own,  retained  very  little  Harriman  influ 
ence;  when  the  Vanderbilts  loosened  their 
hold  on  the  New  York  Central  or  when 
Garrett  died,  leaving  behind  him  the  work 
of  his  life,  the  Baltimore  &  Ohio,  or  when 
Hill,  of  the  Great  Northern,  dies,  there 
was  or  will  be  nothing  to  speak  of  left  of 
these  men  in  their  institutions ;  as  financial 
factors  their  names  become  of  no  import. 
It  is  entirely  otherwise  with  the  name  of 
Morgan. 


THE  END 


14  DAY  USE 

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